Chapter 13 Bankruptcy is the second most common type of bankruptcy and used primarily by individuals. The goal of Chapter 13 is to eliminate your debt by creating a repayment plan to pay back all or a portion of what you owe your creditors over three or five years. You make monthly payments to a court trustee, and the trustee distributes the money to your creditors. At the end of your plan, the remaining unpaid debts are discharged.
Filing Chapter 13 creates an automatic stay that stops most collection actions, which generally means creditors can’t seek wage garnishments, make calls demanding payment or file lawsuits. Automatic stays also protect your co-debtors and can save your home from foreclosure. However, you must continue to pay your mortgage or the lender can get the court to start foreclosure proceedings.
Chapter 13 bankruptcy works especially well if you can afford to pay some, but not all, of your debt. If you’re faced with unsecured debts, including credit cards and medical bills, Chapter 13 helps you achieve a more manageable and affordable payment. It helps you get past late payments on your home, car or other debts. It protects your property while giving you time to pay off your debts and attorney fees within a monthly payment plan.