CHAPTER 13 BANKRUPTCY
Chapter 13 is usually used to stop a mortgage foreclosure and catch up the payments. Sometimes Chapter 13 is called a "wage earners" plan or a "consolidation plan" and it gives you more flexibility with your secured debt and other debts not discharged in a Chapter 7.
Chapter 13 consolidates all your debt into one affordable monthly payment. The Chapter 13 bankruptcy trustee takes your monthly payment and spreads it out to your creditors for anywhere from 36 to 60 months. While you are in Chapter 13 your creditors cannot sue you, foreclose on you, or even contact you directly.
Chapter 13 is very flexible. Mortgages can be reinstated, car loans can be refinanced at a lower interest rate, and credit card interest can be eliminated, and balances on unsecured debts can be reduced dramatically. Chapter 13 can even force the IRS to take a payment plan and release its wage garnishments.
And if for some reason you do not qualify for a Chapter 7, Chapter 13 usually offers you a great second option.