What is a Wage Earner Plan?
How Does a Wage Earner Plan Work?
In a Chapter 13 bankruptcy -- formerly called a wage earner plan -- a person petitions the court to reduce the total amount owed and provide a reasonable repayment schedule based on his or her income. Similar to a Chapter 7 bankruptcy, the debtor gets legal protection from lenders’ collection attempts. Moreover, a debtor is allowed to keep outstanding assets provided that he or she adheres to the repayment framework set forth by the court.
Why Does a Wage Earner Plan Matter?
When it was first devised, only individuals with a consistent paycheck could qualify for Chapter 13 bankruptcy (hence the name "wage earner plan"). Today, small business owners and commission-based sales professionals also qualify for bankruptcy protection under Chapter 13.