A Chapter 13 bankruptcy is basically a bill repayment plan.  Chapter 13 plans can stretch out your payments for up to 5 years.  The benefit is that instead of making multiple payments to multiple creditors, you only make one payment to the Court Trustee.  Another benefit is that the payment plan is often interest free for many debts (except for things like your car or house).

Chapter 13 plans generally come into play if you have too much discretionary income (income left over after normal monthly expenses) and you don’t qualify for a  bankruptcy.

A Chapter 13 plan may also be advisable if you own a home with equity.  Many times, depending on how much equity is in the home, one would have to sell their home in a Chapter 7 bankruptcy to pay off creditors.  One way of avoiding this is to create a Chapter 13 repayment plan.

Click here for a detailed explanation of the Chapter 13 Process.