A Chapter 13 is also known as a bill consolidation chapter.

Chapter 13 is designed for individuals with regular income who would like to pay some debts in installments over a period of time. The period of time may be three to five years depending on numerous factors. Under a Chapter 13, you must file a plan with the Court of how you are going to repay your creditors. The plan must be approved by the Court. The attorney will develop a plan for you.

Chapter 13 plan can include the amount you are behind to your mortgage company or your vehicle company. The plan may allow you to pay certain federal and state taxes over a period of time. The plan can also allow you to pay your back child support. The plan may also lower your interest rate on certain secured debts down to the prime rate of interest. As of 2010, the prime rate is 3.25%.

In a Chapter 13, you may be able to “cram-down” certain secured debts. A “cram-down” means you can pay the lesser of the value of your collateral or the secured debt. If you have had your vehicle debt for two and half years, you can pay just the value of the vehicle and not the entire debt. For example, if you have owned your vehicle for 910 days and your vehicle is only worth $8,000.00 and you owe $15,000.00, you can pay your creditor $8,000.00 over a period of time. This may allow you to lower your vehicle note.

In a Chapter 13, you can cram-down other debts if you have had the debt for over a year. For example, you may be able to “cram-down” your mobile home, furniture notes, and appliances.
You can also include credit cards, medical bills, signature loans, payday loans, collection agency, overdrafts, and repossession in your Chapter 13 plan. The amount these creditors get paid back depends on your income. After completing the payments under your plan, your debts are generally discharged. In most instances, the unsecured creditors only receive “pennies on the dollar.” This means you may owe $30,000.00 to your unsecured creditors; however, depending on your income, you may only have to pay them a few hundred dollars.
The debts that are not discharged include domestic support obligations, most student loans, certain taxes, most criminal fines and restitution obligations, certain debts which are not properly listed in your paperwork, certain debts for acts that caused death or personal injury and certain long term secured obligations. The attorney will review your debts and determine their eligibility.