Chapter 13 is also known as “reorganization” or “consolidation.” If your income is determined to be too high for Chapter 7 and you have regular income, but you are facing foreclosure on your home, auto repossessions or tax debts, Chapter 13 can help give you some breathing room.
In a Chapter 13 bankruptcy filing, the debtor provides creditors with a proposed repayment plan, detailing how the debtor intends to pay off his or her obligations. The bankruptcy code generally allows the debtor three to five years to pay off the debt. If the creditors and the bankruptcy court approve the plan, the debtor makes regular payments to the bankruptcy trustee and the trustee pays the creditors in accordance with plan provisions.
The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file.
After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury; and certain long term secured obligations (like mortgages).