This is a general and abbreviated description of the Chapter 13 bankruptcy process and, while I hope it gives you an idea of how this process works, it is not intended to be legal advice and should not be considered or relied upon as such. Feel free to call me for a free bankruptcy consultation at 917-414-6795.

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In my experience, a debtor enters into a Chapter 13 bankruptcy only when they are faced with one of following two debt situations, neither of which can be resolved with a Chapter 7 bankruptcy, but in which a Chapter 13 can be immensely helpful. 

 

First, if you own a home, have fallen behind on your monthly mortgage payments and are at risk of losing your home in a foreclosure sale, a Chapter 13 filing can pause the sale for up to five years during which you will have the opportunity to save your home by catching up on your arrears. 

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Second, if you are burdened by excessive unsecured debt (credit cards, personal loans etc.) and creditors are threatening to take you to court, garnish your wages and freeze your bank account but you can't file a Chapter 7 bankruptcy because your income is too high and you won't qualify, a Chapter 13 filing will, again, pause all creditor enforcement actions for up to five years during which you will have the opportunity to resolve that debt.

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If you are using your Chapter 13 to pay mortgage arrears, you will have to pay 100% of that debt over the course of your plan. If you are using your Chapter 13 to pay off unsecured debt, the amount that you pay will depend in many cases - though not all - on how much income you have left over every month after you have paid your regularly scheduled debt obligations (for example, your monthly mortgage loan payments and car loan payments) as well as your utilities and allowed living expenses. 

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Anyone can file a Chapter 13 bankruptcy petition and by doing so stop any debt enforcement action, but your Chapter 13 case will be dismissed within a month and debt enforcement will resume unless during that time you and your attorney submit to the court a payment plan by which will pay your debts as described in the paragraph above over the course of 3 years (in 36 equal monthly payments) or 5 years (in 60 equal monthly payments.) 

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The goal of a debtor and their attorney in a Chapter 13 filing is to have their payment plan approved or "confirmed" by the court, but even if the plan is confirmed, if at any time during the course of the plan the creditor repeatedly fails to make their monthly Chapter 13 plan payments, their Chapter 13 bankruptcy can be dismissed and, again, the creditors will be permitted to resume debt enforcement actions.