What is the primary purpose of a Chapter 13 bankruptcy?

The primary purpose of a Chapter 13 bankruptcy is to serve as a wage earner's plan for debt restructuring. This type of bankruptcy is designed for individuals with a regular income who are unable to pay their debts but wish to retain their assets. Under Chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. This allows them to keep their property and manage their debts in a more organized manner, addressing financial issues while still working toward financial stability.

The focus on restructuring instead of liquidation is key here. Unlike Chapter 7 bankruptcy, which involves the liquidation of assets to satisfy debts, Chapter 13 enables individuals to repay their debts with the income they have, providing them the opportunity to reorganize their financial situation without losing significant assets.