Under Federal law, individuals with regular income from wages or commissions, as well as individuals who operate a small unincorporated business, are entitled to reorganize their finances under Chapter 13 of the Bankruptcy Code. To be eligible for Chapter 13, your unsecured debts must be under $250,000 and your secured debts under $750,000. If your debts are over those limits or you are a corporation, you must file a Chapter 11. Chapter 13 can be very helpful to individuals with many financial or business problems. Upon the filing of the Chapter 13 petition with the court, an order from a judge of the United States Federal Bankruptcy Court is entered which stops all lawsuits, garnishments, repossessions, foreclosures, and collection harassment. This order also stops collection actions and garnishment against co-signers on consumer debt. Under the Chapter 13, you and your lawyer will propose a plan to reorganize your financial affairs.
Under the Chapter 13, any creditor who holds a mortgage on your home, or liens on vehicles or furniture, must be paid 100% of the value of his security. However, depending on what assets you own and what your income and expenses are, other creditors may be entitled to receive as little as 0% of what is owed. The typical Chapter 13 usually lasts 36 months. However, it may last up to 60 months with special permission from the court. It may also last less than 36 months if all creditors can be paid in full in a shorter time.