Chapter 13 is often called Individual Reorganization.

Under Chapter 13 you must submit a repayment plan to the court appointed Chapter 13 Trustee in which you must pay all or part of your debts for a period from three to five years. All of your creditors are paid some portion of the balance you owe them. An approved Chapter 13 plan stops your creditors from taking action to collect what you owe provided that you keep making your plan payments. To be approved, your Chapter 13 plan will require you to live a frugal life and pay your discretionary income to the Trustee for a period of 3 to 5 years. A reasonable budget plan will be needed for your plan to succeed.

Your Chapter 13 plan must pass two tests:

1. The BEST INTERESTS TEST -mandates that unsecured creditors be paid at least as much as they would receive if you filed a Chapter 7 instead of a Chapter 13.
2. The BEST EFFORTS TEST – requires that you pay all your disposable income (the amount left over after paying reasonable living expenses) to the trustee for at least the first 36 months of your plan.

If your monthly income is more than the median for your state, allowable expenses will be based on IRS standards for the area. If your income exceeds IRS median income and expense levels for your state, your Chapter 13 plan must run for five years. If your income is below these income and expense levels, your Chapter 13 plan must run for a period of at least three years.

When you complete payments under your Chapter 13 plan you’re done !