Chapter 13 is a complex reorganization plan under the U.S. Bankruptcy Code.  A debtor agrees to submit all of his disposable income over the next 36 to 60 months.  That income is submitted to a Chapter 13 trustee who in turn, makes disbursements to creditors.  The amount of the payment is based upon the debtor’s monthly income minus monthly expenses.  The Chapter 13 trustee will ensure that the debtor is not padding the budget with unnecessary expenses.  If the trustee deems that the debtor is in compliance with the code, he will recommend that the case be confirmed.  A confirmed case is solid in that if the debtor complies with the terms of the payment plan, he will receive a discharge.  Some confirmed Chapter 13 cases provide for less than 100% payback to creditors.  To pay less than 100% through the plan is known as a compromised Chapter 13.

A Chapter 13 will prevent a foreclosure sheriff sale, auto repossession, wage garnishment or other collection attempt.  Provided the debtor makes good on his payments, creditors are prohibited from seeking to collect from the debtor.  However, if the debtor falls behind on his Chapter 13 payments, creditors can petition the court to modify the automatic stay.  If the automatic stay is modified, there is no longer any bankruptcy protection for that creditor.