Chapter 13 bankruptcy rules dictate that people who have precious assets like a home or other valuable property (which is not covered by Chapter 7) discharge usually filed for Chapter 13 bankruptcy. Those who file Chapter 13 bankruptcy are also required to be wage earners that have stable enough income to repay a part or all of the debt through installments over 3 to 5 year period.

Chapter 13 bankruptcy is usually a three-year payment process, but can extend to five years in some cases depending on approval by the judge. All that collection efforts by creditors must cease during this period.

The critical difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy is that with Chapter 13, all payments are not released immediately. Instead the debtor will reimburse their creditors over a time span of five years. Careful planning of monthly payments, and an expanded schedule submitted to the court are requirements. Additionally, debtors who file Chapter 13 bankruptcy are able to keep their homes provided they adhere to the payment schedule. Secured debt payments can also be lowered. So in a sense Chapter 13 is similar to debt consolidation programs for credit card users.

To be eligible for filing bankruptcy, the individual will need to have secured debts valued at over $800,000 in unsecured debt valued around 300,000. That’s that are not eligible under Chapter 13 are student loans, drunk driving penalties, criminal offenses and the like.

When filing for Chapter 13 bankruptcy one will need to petition with the court in their appropriate jurisdiction. Within 20 days the individual filing will need to submit it payment plan. At that point the court will appoint a neutral trustee who will act as a mediator between the creditor and debtor. One to two months after submitting the payment plan, the creditors will be called into a conference by the judge, who will then confirm the repayment plan. At this point it is up to the debtor to pay on time or they risk the chance of reverting back to chapter 7 bankruptcy.