Chapter 13 is an interest-free debt repayment plan through which you consolidate your debts and make a payment on your debt over a 3 to 5 year period.

While in a chapter 13 debt repayment plan, the creditors cannot collect from you, and the creditors are required by a Federal Court order to adhere to the terms of the plan. One very important thing to remember about Chapter 13 bankruptcy is that you must be working or have a consistent source of income for your repayment plan to be approved by the court.

Not only must you be able to pay for your monthly living expenses, but you must also be able to make a payment to the court to consolidate your debts.
Debts that are generally consolidated in a chapter 13 are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts. All outstanding debts must be included in the Chapter 13 consolidation.

Stop Foreclosure Immediately

If your home is presently in foreclosure, a Chapter 13 bankruptcy filing will stop the foreclosure any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13. You will still be obligated to make all future mortgage payments directly to the mortgage company, but they may not foreclose to collect any outstanding mortgage payments.

Save Your Car

If the "repo" man is looking for your car, a Chapter 13 bankruptcy will also stop the finance company from repossessing your car. The past due payments and the entire balance on your vehicle loan will be consolidated into the Chapter 13, which you will pay off over the next three to five years. The vehicle finance company can no longer repossess your car, and you will no longer have to make a payment directly to the finance company. Only one payment is made, and that is to the Chapter 13 trustee. Under certain circumstances we can even recover your vehicle after repossession and consolidate the remaining balance.

Consolidate Student Loans

Although you may not eliminate student loans in a Chapter 7 bankruptcy, you can consolidate them, with your other bills, in a Chapter 13 and stop collection action against you. A Bankruptcy will stop the collection action and garnishments related to student loan debts and consolidate your bills so that you may repay them in a plan that is feasible for you.