A Chapter 13 is a “wage-earners” bankruptcy. When you file a Chapter 13 bankruptcy, you submit a plan to repay your debts over a three to five year period. The bankruptcy laws determine how much you will pay based on your income and expenses. At the end of the three to five year period, generally, all remaining unsecured debts will be discharged. Chapter 13 can save your home from foreclosure. In addition, Chapter 13 bankruptcy is an option when your income is too high to qualify for a Chapter 7 bankruptcy or when you have significant assets you would lose by filing a Chapter 7 bankruptcy. Chapter 13 can also be an effective way to pay tax debt without incurring additional interest and penalties.

The filing of a bankruptcy petition automatically stops most collection actions such as garnishments, foreclosures, repossessions and lawsuits. This “automatic stay” allows you to have a breathing spell during which you have the opportunity to put your finances in order and try to chart a more promising financial future.