Chapter 13 bankruptcy involves a 36 to 60-month repayment plan. Most individuals, incorrectly assume a Chapter 13 requires them to pay back all their debts. This it generally not true. A Chapter 13 however does require a monthly payment.
There are three basic reasons to file Chapter 13. First, if someone is facing foreclosure we can stop the foreclosure and save the home. Second, a vehicle is facing repossession and we stop that and usually lower the vehicle payment. Third, individual’s earnings are sometimes high enough that they do not qualify for Chapter 7 under an income test -called the Means Test.
Generally, the only debts paid in a Chapter 13 are mortgage arrears, vehicle payments and some taxes. Rarely do debts like credit cards, medical bills, payday loans, or even student loan get paid anything in a Chapter 13. They do however get discharged or eliminated. Student loans are an exception and do not get eliminated in a Chapter 13 bankruptcy however it does stop the payment on the student loan for up to a five-year period.