A Chapter 13 bankruptcy is a type of repayment plan. Unlike and Chapter 7, this type of bankruptcy does not liquidate your assets in order to pay back creditors, rather allowing you to make affordable payments instead. A Chapter 13 bankruptcy can also take care of secure debts like a mortgage, car payments, and some taxes and loans. However, this bankruptcy can last up to five years depending on how much you owe and the size of your payments.

A Chapter 13 bankruptcy acts like a consolidation loan, in which you make one payment to the trustee and they pay the creditors. This means that you will have no direct contact with your creditors and they cannot call or harass you. This type of bankruptcy lowers the monthly payments that you may already be making, but are behind on, and saves you from late fees and penalties. This type of bankruptcy can also save your house and car rather than having them liquidated in order to pay off your creditors. Also, if you had a co-signer on some of your secured debts, a Chapter 13 can protect their credit as well. However, a Chapter 13 filing may take up to five years to complete, but the rewards are numerous.

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To be eligible for a Chapter 13 you must meet a few requirements. These include having less than $336,900 in unsecured debts and $1,010,650 in secured debts. You must also attend a credit counseling class in the past 180 days before filing. If you owe too much then a Chapter 7 filing may suit you better, but the credit counseling class is required for all personal bankruptcies as of 2005 as well as a financial management class after the fact.

There are some more technical requirements that you must meet before filing, but your attorney would be able to explain them better as they may vary from state to state and case to case. You can read more about these requirements on the U.S. Bankruptcy Court website.