Chapter 13 is form of reorganization whereby a debtor commits all of his disposable income toward the repayment of his debts.  The debtor submits a plan to repay his creditors.  The typical Chapter 13 plan runs between 36 and 60 months.  During the terms of the repayment plan, creditors are prohibited from collection efforts upon the debtor.  Some creditors are paid 100% back while others are paid 10% back or less.  The factors that determine the payback are the income of the debtor, expenses of the debtor and the type and total amount of the debt.

The plan that the debtor proposes to repay his debts must be approved by the bankruptcy court judge.  The Chapter 13 trustee will either recommend that the plan be approved (confirmed) or request that the case be dismissed.  The main reason for dismissal is the debtor’s inability to make timely plan payments. 

In a home saver case, the debtor will repay the mortgage arrears through the Chapter 13 plan while making his current mortgage payment directly to his mortgage company.  If the debtor fails to make either payment, the mortgage company will be able to opt out of the bankruptcy case and proceed to foreclose on the property.

An individual receives a discharge under Chapter 13 once he has completed his payment plan.  In some cases, an individual is not eligible to receive a discharge.  Please consult with an experience bankruptcy attorney to determine whether or not chapter 13 is feasible.