What is a Chapter 13 Bankruptcy?

In a Chapter 13 case, an individual with regular income repays all or a portion of his or her debts over a three-to-five-year period through a monthly payment plan approved by the Bankruptcy Court. For that reason, a Chapter 13 case is sometimes referred to as a “wage-earner plan.” The Chapter 13 Trustee does not take possession of non-exempt assets but supervises the case and administers the payments to creditors under the Chapter 13 plan.
A Chapter 13 debtor who completes all payments provided for in the approved Chapter 13 plan receives a discharge. Under certain circumstances, a discharge also may be granted to Chapter 13 debtors who do not complete the payments under their plan because of circumstances beyond their control. A Chapter 13 discharge may allow the discharge of certain debts that may not be discharged in Chapter 7, which may make Chapter 13 more attractive to you, depending upon your unique circumstances. If the payment plan is not successful, it may be possible to convert the case and obtain a discharge under Chapter 7.