Chapter 13 is ideal for people who have a problem with their mortgage, need to stop a foreclosure, need time to catch up on mortgage arrears, have assets that they would lose if filing a Chapter 7, are behind on car payments, have many secured obligations, are not eligible to file Chapter 7, or just want to pay their obligations but in reduced payments.

Filing a Chapter 13 will stop all creditor harassment, foreclosures, wage assignments or wage deduction orders, lawsuits, repossession of personal property and internal revenue levies. Friends and relatives who may have co-signed on a debt may also be protected.

To be eligible to file a Chapter 13, one must have income "sufficiently stable and regular" to make payments under a plan which must be approved by the court. Income can be derived from sources other than employment, and people receiving social security, disability, unemployment, veterans or retirement benefits and rental income are also eligible. Stock brokers and commodities brokers, as well as corporations are not eligible for relief under Chapter 13.

Individuals who are self employed or sole proprietorships are eligible if unsecured debts are less than $307,675 and secured debts less than $922,975. The dollar figures increase every three years by 10%.

The bankruptcy court must approve and confirm a Chapter 13 plan. To gain approval, a plan must fulfill certain requirements such as:

a. The plan must be proposed in good faith
b. The amount unsecured creditors are to receive cannot be less than would be paid had a Chapter 7 been filed.
c. The plan must propose to pay all disposable income not reasonably necessary for the debtor's maintenance and support


Consent to the plan by unsecured creditors is not necessary and consent of secured creditors is also not necessary if the plan provides to pay the balance due or return the creditors security. Under both Chapter 7 and Chapter 13, judicial liens on certain property can be set aside if the lien interferes with state exemptions.