What Is Chapter 13?
A Chapter 13 bankruptcy is useful for those who earn more than the state median income, have assets that they want to keep but would have to give up in Chapter 7, or want to get back a repossessed vehicle. A Chapter 13 can save your home from foreclosure, can discharge debts that would not otherwise be dischargeable in Chapter 7, and can reinstate your driver’s license. There are other reasons to file Chapter 13, but those are the most common.
In a Chapter 13 you will make regular payments to creditors over a period of between three and five years. The size of your payments will depend upon the facts of your case. You need not repay all of your debt. If you cannot afford to repay all creditors completely, you will propose a plan to pay amounts due on debts that are secured by the collateral (such as your home or vehicles) that you want to keep and other debts that would not be discharged in a Chapter 7, such as taxes, student loans, back child support, and traffic infraction fines, as well as other non dischargeable debts. No matter how little you pay to your unsecured creditors, at the end of your plan your debts will be discharged.
Chapter 13 can do many things that Chapter 7 cannot do. But to qualify for Chapter 13 you must have sufficient income to pay all your necessary monthly living expenses and have some money left over to make Chapter 13 payments.