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Chapter 13 Bankruptcy: Wage Earner's Reorganization
People typically choose Chapter 13 if they are over the income limit for Chapter 7 or if they wish to save their home from foreclosure or car from repossession. Filing bankruptcy halts all collection actions, including foreclosure and repossession, while the bankruptcy process is ongoing. Because Chapter 13 gives you three to five years to catch up on payments, it is often a good choice for people facing foreclosure or repossession.
Basics of Chapter 13
Under Chapter 13 bankruptcy, your debts, including the mortgage, will be reorganized into a repayment plan over three to five years. As part of the plan, the payments on these debts will be lowered so they are more affordable.
Successful completion of the repayment plan will result in some of your remaining debts being discharged, if they are eligible. Unsecured debt, such as credit cards and medical bills, may be discharged. Some debts are not dischargeable under bankruptcy, including court-ordered child support and spousal support, student loans and certain types of taxes.