When you file a Chapter 13 bankruptcy petition, you get immediate debt relief via the automatic stay that comes with filing any type of bankruptcy. That means collection actions against you must cease, including foreclosure or garnishment of wages. Since a Chapter 13 filing involves a debt repayment plan, it doesn’t mean you’re off the hook for payments for good.
What Chapter 13 does is let you reorganize debts so that you can make payments and dig out of a financial hole. For some debts, you will end up paying the total amount owed through a three- to five-year payment plan. These include certain secured debts and some priority debts, such as back taxes. You might also keep your mortgage, paying it through the trustee during your plan and then paying it again normally after the plan.
One of the big benefits of Chapter 13 is that you can end up paying unsecured creditors — such as credit card companies — a fraction of what you owe. The amount you must pay back to these creditors depends on factors such as how much you owe, what your expenses are and how much income you have each month. You will have to provide documentation of all this information when you file your bankruptcy petition or shortly thereafter.
Working with all the schedules and calculations when creating a Chapter 13 plan can be daunting, which is one reason to consult an experienced bankruptcy lawyer. A lawyer who understands the bankruptcy plans and deals regularly with the trustees in your jurisdiction can help you get the best possible outcome from your plan.