A Chapter 13 Bankruptcy is a form of debt consolidation. Like Chapter 7 Bankruptcy, it is a procedure in federal court that begins with the filing of a bankruptcy petition and schedules. A Chapter 13 Bankruptcy differs from a Chapter 7 Bankruptcy because it provides for a repayment of percentage of unsecure debt rather than an outright discharge of all unsecure debt. The repayment usually occurs over a three to five-year period. Chapter 13 bankruptcy is most often used by people who are behind on home or car payments or whose income are too high to pass the means test. For these people, the Chapter 13 Bankruptcy will prevent a foreclosure or repossession and allow the person with debt to pay back the amount they are behind over a period of up to five years. Some unsecured debt is also repaid, although it is often at substantially less than the full amount owed. If the person with debt completes the plan, they will receive a discharge as to the remaining balance on any unsecured debt. A person must have documented income and prove that he can afford the monthly payments in order for the court to approve a Chapter 13 Bankruptcy.
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