Under Chapter 13, the debtor proposes a plan to pay his creditors over a 3- to 5-year period. This written plan details all of the transactions (and their durations) that will occur, and repayment according to the plan must begin within thirty to forty-five days after the case has started. During this period, creditors cannot attempt to collect on the individual’s previously incurred debt except through the bankruptcy court. In general, the individual gets to keep his property, and his creditors end up with less money than they are owed.
Most consumers are interested in a Chapter 7 discharge. However, there are many reasons to file a Chapter 13 bankruptcy. These include:
- Stopping foreclosures
- Stripping second mortgages
- Spreading out tax debts
- Lowering loan balances on car loans
If a debtor cannot makes all of his or her plan payments, he or she can seek to convert the bankruptcy into a Chapter 7 discharge.