Chapter 13 bankruptcy allows a person to consolidate their debt while making monthly payments to a trustee. A payment plan is proposed which repays all or a portion of the debt over a three to five year period. The amount of the monthly payment and the length of the repayment plan is based on:
- Monthly income of the person
- Monthly expenses of the person
- Amount and nature of the debt
The most common uses of Chapter 13 involve:
- Repayment of home mortgage arrears
- Restructuring of auto loans to save a vehicle
Secured debts are paid 100% on the dollar, while unsecured debts may be paid less than 100% on the dollar. A person receives a discharge under Chapter 13 once the payment plan is completed.