Chapter 13 bankruptcy protection is commonly referred to as “wage earners protection”. It is referred to in this way because this type of plan affords debtors who have a regular income the opportunity to workout a payment plan with their creditors. A good way to think of Chapter 13 protection is as a restructuring of your debts. Whereas chapter 7 is more black and white (your assets are liquidated to pay creditors), chapter 13 allows for the restructuring of debt and also provides a greater likelihood of saving your home from foreclosure and your vehicle from repossession. The payments plan that comes out of a chapter 13 bankruptcy will always be for a period of 3-5 years. A chapter 13 payment plan will never be more than 5 years in duration.

Another advantage of chapter 13 protection is that it will act like a debt consolidation loan during the payment period. The debtor will make one monthly payment to the bankruptcy trustee and the trustee will pay the appropriate amount to each creditor. This makes the process easy to manage for the debtor.