Chapter 7 Bankruptcy gives people a fresh start. Most debts are dischargeable in a Chapter 7, which means that they do not need to be paid back.
Chapter 13 Bankruptcy allows you to reorganize your debts. Depending on your situation, you may not qualify to liquidate all of your debts under Chapter 7 bankruptcy. If you do not qualify for a Chapter 7 bankruptcy, you can file a Chapter 13 bankruptcy.
In Chapter 13 bankruptcy, your debts are reorganized and you will make one monthly payment to the Chapter 13 trustee under a plan that lasts from three to five years. The monthly payment is usually much lower than your monthly payments to creditors prior to filing, and in many instances you only pay back a percentage of your unsecured debts. You can stop foreclosure of your home with a Chapter 13 filing and prevent the forced sale of your home. If you have a pending foreclosure, court date, sale date, or are worried that the bank is getting ready to foreclose, a Chapter 13 filing will stop any and all foreclosure proceedings prior to the sale.
It is a payment plan that restructures your debt.
