The Chapter 13 Process

In chapter 13, you must submit a plan in which you set out a budget detailing your take-home pay and monthly living expenses. Any excess income is paid to the bankruptcy trustee who then distributes money to creditors on a pro-rata basis. The plan lasts for 36 to 60 months, unless your debts are fully repaid in a shorter period of time. At the end of the chapter 13 plan, any amounts still owing on your unsecured debts are forgiven. Chapter 13 payments can be automatically withdrawn from your bank account by the trustee if you choose.

Mortgage Problems: Another benefit of chapter 13 specifically for homeowners is back mortgage payments can be put into the chapter 13 plan and paid off over the plan period, rather than all at once. So long as you can continue to make regular post-petition mortgage payments, the bank can't foreclose on your house because you chose to put mortgage arrearages into a chapter 13 plan. In fact, chapter 13 was originally designed for this purpose, to prevent foreclosures.