In detail
Chapter 13 bankruptcy is a legal process under the U.S. Bankruptcy Code. It is available to individuals, including sole proprietors, who have regular income and debts below certain statutory limits. Unlike Chapter 7 bankruptcy, which involves liquidation of nonexempt assets, Chapter 13 allows the filer to keep property, such as a home or car, while making payments to creditors through a trustee. The filer proposes a repayment plan, which must be approved by the bankruptcy court. The plan generally lasts three to five years, depending on the filer's income and the nature of the debts. Secured debts, priority debts, and certain unsecured debts must be addressed according to bankruptcy law. Information about a Chapter 13 bankruptcy filing may appear on a consumer's credit reports as a public record. The Fair Credit Reporting Act (FCRA) governs how credit reporting companies handle such information. Under the FCRA, a Chapter 13 bankruptcy can remain on a credit report for up to ten years from the date of filing, although credit reporting companies may remove it earlier in some cases. The presence of a bankruptcy is a factual item in a credit history, and its impact on a credit report and any credit score is determined by the scoring model used. Different credit scoring models may treat public records differently, and some may not include them at all. A Chapter 13 bankruptcy is distinct from a Chapter 7 bankruptcy, which is a liquidation proceeding. The two are separate legal options with different eligibility requirements and outcomes. The term "bankruptcy" broadly refers to the legal status of a person or entity that has filed for protection under the Bankruptcy Code. A "public record" is any information about a legal proceeding that is available to the public, and bankruptcy filings are typically public records. Credit reporting companies may include public records in credit reports as permitted by law.