Chapter 13 of the bankruptcy code, sometimes called “repayment” or “adjustment of debts,” is often used by debtors (that’s you) who have a regular income which is above the maximum allowed for filing under Chapter 7, but who still can’t pay the bills for their monthly expenses. Sometimes a huge medical expense places people in this type of situation. Sometimes, a debtor who has significant equity in a home or some other property and wishes to keep the property can do so under Chapter 13.
Chapter 13 is basically a payment plan, but the payment is calculated on your ability to pay—not how much you owe. You make one payment to the U.S. Trustee, not many, many individual payments to your creditors. You have three to five years to catch up, again based on your ability to pay. Your attorney will work with you to develop a plan that will be approved by the Court. Whatever debt is left over at the end of your plan period will be discharged, or forgiven, much like in a Chapter 7 filing.
Chapter 13 can be a complex process. Please call us to discuss your specific situation and whether filing a bankruptcy petition under Chapter 13 is the best course of action for you.