Chapter 13 uses the power of the federal court to reorganize debts and set up affordable payments for individuals. Utility disconnections, repossessions, foreclosures, and wage garnishments all have to stop as soon as the case is filed with the court. My clients tell me they feel confident they can complete Chapter 13 plans and restructure their finances because Chapter 13 gives them three to five years to pay debts, in some cases interest rates on secured debts can be reduced, and the amount of the payment is based on what their budget says they can afford, not on the total amount of debt they owe.
In Chapter 13, a trustee is appointed to collect payments from individuals and distribute those payments to creditors according to the plan filed by the individual with the court. Each plan submitted to the court is tailored to fit the particular situation presented by that person, so no two Chapter 13 plans are exactly the same.
Once an individual completes a Chapter 13 plan, the judge signs an order saying all the debts that are eligible to be wiped out are discharged.