Chapter 13 of the bankruptcy code offers individuals with regular income an opportunity to repay all or part of their debt while avoiding debt collection efforts by creditors. Under Chapter 13, debtors propose a repayment plan which includes installment payments to creditors over a three to five year period. Under no circumstances is the plan allowed to last more than five years. 11 U.S.C. § 1322(d). The length of the repayment plan depends on the debtor’s monthly income at the time of the filing. If the debtor’s income is less than the applicable state median, the court will require the repayment plan to be completed within three years. An extension to a five year plan can be approved "for cause." A debtor with income greater than the state median is generally required to accept a five year plan. During this time, the bankruptcy laws prohibit a creditor from starting or continuing collection efforts.

Advantages of filing for bankruptcy under Chapter 13 is that debtors are provided an opportunity to save their home from foreclosure. A Chapter 13 filing halts foreclosure proceedings and can be used to catch up on delinquent mortgage payments over the life of the repayment plan. Unfortunately, the filing does not allow a debtor to forgo making mortgage payments that come due during the repayment plan. Additionally, the bankruptcy court is not allowed to change your monthly payment, interest rate or terms of the mortgage if the property is your primary residence. Consequently, if you are unable to make the monthly mortgage payment even with the assistance of Chapter 13 protection against creditors, a Chapter 7 liquidation filing may be necessary.

- Richard V. Stokan, Jr.