A Chapter 13 bankruptcy is also called a wage earner’s repayment plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. With a Chapter 13 bankruptcy, debtors develop a repayment plan to make installments to creditors over three to five years based on the debtor’s income. During this time, it is illegal for creditors to contact you to collect debts.
A Chapter 13 bankruptcy can have a number of advantages. Perhaps most significantly, Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing Chapter 13, individuals can stop foreclosure proceedings, and it allows them to pay their past due mortgage payments over time.
Another advantage of Chapter 13 is that it allows individuals to pay their other secured debts in the payment plan (like car loans) and extend them over the life of the Chapter 13 plan. Doing this may lower the payments.