Chapter 13 reorganization cases are usually preferred by Debtors who have a valuable asset, such as a home, that is not completely covered by exemptions and that they wish to keep, or, if they are behind in payments on secured debt and they wish to retain the asset. Under Chapter 13 a Debtor proposes a plan to repay creditors over a three to five year period during which the Debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions. This monthly Plan Payment will also include the repayment of some percentage of your unsecured debt. This amount will be calculated by your attorney based upon the documentation provided by you regarding your monthly income and expenses. Since the Debtor's plan will require regular monthly payments a Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income.
At a confirmation hearing, the court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from Chapter 7, since the chapter 13 Debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the Debtor's anticipated income over the life of the plan. Unlike Chapter 7, the Debtor does not receive an immediate discharge of debts. The Debtor must complete the payments required under the Chapter 13 Plan before the discharge is received. The Debtor is generally protected from lawsuits, garnishments, and other creditor action while the Plan is in effect.