Certified Revenue Cycle Representative (CRCR) Practice Exam

Which statement best describes Chapter 13 Bankruptcy?

1. That reorganizes a debtor's holdings and instructs creditors to look to the debtor's future earnings for payment

2. That establishes a payment priority order to creditors

3. That creates a clear court-supervised payment accountability plan going forward

4. That classifies the debtor as eligible for government financial assistance

The correct answer is: That reorganizes a debtor's holdings and instructs creditors to look to the debtor's future earnings for payment

Chapter 13 Bankruptcy is specifically designed for individuals with a regular income who wish to create a plan to repay all or part of their debts over a specified period, typically three to five years. This chapter allows the debtor to reorganize their financial situation while maintaining their assets. The statement that it reorganizes a debtor's holdings, instructing creditors to look to the debtor's future earnings for payment, accurately reflects the core purpose of Chapter 13, which centers on restructuring debts based on the debtor's income and financial capability. In this framework, the debtor proposes a repayment plan to make installments to creditors, meaning that future earnings will be utilized to address outstanding obligations. This model allows individuals to retain their property while fulfilling their debt requirements over time, which is a significant aspect of Chapter 13 compared to other bankruptcy chapters. Other options do address elements of the bankruptcy process but do not fully capture the essence of Chapter 13. Payment priority or the establishment of payment accountability can be seen in various bankruptcy contexts, but they do not specifically define the reorganizational and income reliance characteristic of Chapter 13. Additionally, classification for government financial assistance is not a feature associated with Chapter 13 Bankruptcy.