Chapter 13 Bankruptcy

Chapter 13 bankruptcy involves a court-supervised repayment plan.  The person filing Chapter 13 makes a payment each month to a court-appointed bankrutpcy trustee who then distributes that money to the person's creditors.  Not all debts are treated equally in Chapter 13. Some debts such as child support arrearages and back taxes are treated as "priority" debts and must be paid in full during the term of the repayment plan.  Debts that are secured by collateral (e.g. car loans) are also usually paid in full.  Unsecured debts like credit cards bills and medical bills are often wiped out and not paid anything through the plan.

While some people are forced to file Chapter 13 bankruptcy or not file at all because they make too much money or they have too much property, other people choose to take advantage of the repayment plan associated with Chapter 13.  For people facing foreclosures or overwhelming tax debt, the court-supervised Chapter 13 repayment plan may be a way to force a non-cooperative creditor to accept payments.