Chapter 13 is essentially the opposite of a Chapter 7. Instead of getting a discharge of all your debts, you end up paying at least some of your debts back in a payment plan. Instead of losing your non-exempt property, you can keep most, if not all, of your property depending on the particular case. You might ask what benefit a Chapter 13 has if all of your debts are not discharged (forgiven). Here’s a few: 1) your creditors can’t bug you during the bankruptcy period which could provide a lot of protection for a long time; 2) You can obtain very favorable interest rates on your current debts and even lower your principle balances; 3) your payment plan will be shaped around your income, so if you are currently overextended then this can reduce the monthly payments, basically a glorified refinance structure; and 4) in the end, if you finish out the payment plan, you can receive a significant discharge of any debts remaining that have not been paid off.
There are three reasons we would encourage you to file a Chapter 13 instead of a Chapter 7: 1) you make too much money and you don’t qualify for Chapter 7; or 2) you own too much property that would be exposed to liquidation in a Chapter 7; or 3) you have a previous bankruptcy that is too fresh to file a Chapter 7.