A file under Chapter 13 of the United States Bankruptcy Code, a wage earner plan commonly referred to as Chapter 13 bankruptcy is an alternative to filing bankruptcy under Chapter 7. Through a wage earner plan, debtors, or individuals filing bankruptcy, submit a plan of reorganization of their finances and repaying of debts over a three- to five-year period. Similarly to Chapter 7, debts are eliminated or discharged upon successful completion of a wage earner’s plan. A wage earner's plan is attractive because debtors can retain their assets, known as exempt property, which includes wages, pensions, tools and vehicles associated with work, and a certain amount of equity of their primary residence.

One primary benefit of filing for a wage earner plan is that it offers protection against foreclosure for individuals with delinquent mortgage payments. In a Chapter 13 bankruptcy, the debtor proposes a payment plan that spread out delinquent mortgage payments over a period of three to five years. During this time, creditors are precluded from initiating foreclosure proceedings. Additionally, individuals filing a wage earner’s plan can catch up on any past due mortgage payments over the course of the repayment plan. Once the payment plan is completed, the individual filings bankruptcy may enjoy a fresh financial start.

In order to submit a plan under Chapter 13 bankruptcy, the individual must have a steady income and be current on their local, state, and federal taxes. Furthermore, the total debts must fit within the limits set forth by the Bankruptcy Code. After filing, the debtors must prove their ability to repay the debts by providing verification of income and submitting a proposed repayment plan to the court. The plan must be approved by both the court and creditors and must adhere to certain guidelines. Upon successful completion of the repayment plan, the filing individual receives a discharge from any remaining debts.

A wage earner’s plan is an attractive option for individuals facing financial hardship, offering debt consolidation and foreclosure protection. Debtors should seek the assistance of a knowledgeable bankruptcy attorney in order to ensure successful and timely completion of the repayment plan. In the end, filing a Chapter 13 provides individuals with a fresh financial start and puts them back on the path to financial security.