Chapter 13 Basics

• Chapter 13 bankruptcy permits debtors to create a reasonable payment plan so they can pay off some or all of their debts. It's possible that the plan will provide for only a partial repayment -- pennies on the dollar -- for unsecured debt. Chapter 13 does not sell off the debtor's assets to discharge the debt liability. Once the bankruptcy trustee and creditors agree with the payment plan, the debtor makes payments on the plan until it is completed. The normal amount of time for a payment plan under Chapter 13 is three to five years. Chapter 7 bankruptcies are sometimes converted to Chapter 13 when the court determines that the debtor makes enough money to pay off his debts within five years, or at least makes enough to pay off a greater percentage in a Chapter 13 than in a Chapter 7.
  
  

Unsecured Limits

• The court considers unsecured debts to be those that are not backed by property or assets. Examples of unsecured debt include credit cards and personal loans. Chapter 13 bankruptcy permits debtors to include up to $360,475 of their unsecured debts in a bankruptcy filing. If the debt exceeds this amount, the Chapter 13 bankruptcy case will be dismissed.
  
  

Secured Limits

• Secured debts are those on property, such as real estate and cars. The limit for secured debts is much higher than unsecured debts under Chapter 13. You can include up to $1,081,400 of secured debt in a Chapter 13 bankruptcy. In most cases, entire mortgages are not included in the Chapter 13 bankruptcy, just the payments for which you are behind. You can include other secured debts in the payment plan in order to make the loan payments more manageable.
  
  

Discharge

• Chapter 13 bankruptcy differs from Chapter 7 in that a debtor's bankruptcy case does not conclude until the payment plan is complete. At that time, the court sends a notice of discharge to the filer. The court considers the debt satisfied, and any remaining liability for these debts is discharged entirely. Chapter 13 bankruptcy remains on your credit report for seven to 10 years from the filing date.