A chapter 13 bankruptcy is a reorganization bankruptcy. This allows a debtor to reorganize his debts. Most people file chapter 13 bankruptcy to save a home or vehicle after they have fallen behind on payments. If you are facing foreclosure this can allow you to pay back the past due mortgage payments over a 3-5 year repayment plan.

The other main reason people file chapter 13 is because they do not qualify for a chapter 7 liquidation bankruptcy. If you do not pass the means test you are not allowed to file chapter 7 and may want to consider filing a chapter 13. If this is the case you will pay back a portion of your debts based on your monthly disposable income. Most people end up paying a small fraction of what they owe.

Unlike a chapter 7 or liquidation bankruptcy, a debtor is not forced to sell unexempt property for the benefit of creditors. However, the value of the debtor’s unexempt property must be paid to unsecured creditors over the repayment plan.