A chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, you will propose a repayment plan to make installments to creditors over three to five years. While chapter 7 is usually preferred by most clients, there are situations when a chapter 13 provides some advantages over a chapter 7 case. Perhaps most significantly, chapter 13 offers individuals who are behind on their mortgage an opportunity to cure delinquent payments over time rather than at once. Another advantage is that it allows individuals to reschedule some secured debts (other than a mortgage, such as a car loan) and extend them over the life of the chapter 13 plan. This means that you can lower your car payments and still keep the car while your case is open. Finally, chapter 13 acts like a consolidation loan under which you make one monthly payment to a chapter 13 trustee who then distributes payments to creditors, and creditors cannot bother you while under chapter 13 protection.
For persons whose income exceeds the median level for the state in which they reside, a chapter 13 represents the best chance of relief from creditor harassment. Whether you file a chapter 7 or 13 case, all collection activities by creditors are halted once the case has been filed. Further, a chapter 13 case allows for some types of debts to be discharged that cannot be eliminated in chapter 7. There are specific rules that govern the eligibility of certain types of debts to be discharged, so it is best to consult with an attorney before deciding which alternative will work best for you.