What is Chapter 13 and how does it work?

Chapter 13 is that part (or chapter) of the Federal Bankruptcy Code under which a person may repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. A person who files under chapter 13 is called a debtor. In a chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective. If the court approves the debtor’s plan, it will prohibit creditors from collecting their claims from the debtor during the course of the case. The debtor must make regular payments to a person called the chapter 13 trustee, who collects the money paid by the debtor and disburses it to creditors as called for in the plan. Upon completion of the payments called for in the plan, the debtor is discharged from liability for the remainder of his or her debts.