Chapter 13 is much more complicated than chapter 7. In short, chapter 13 is a debt reorganization and repayment plan. Mostly it is for those who would like to keep assets that would be taken from them if they file a chapter 7 case, or those whose income is too high to qualify for chapter 7. The chapter 13 debtor must have a regular source of income.
A chapter 13 debtor must have a regular source of income to fund their chapter 13 plan over the course of 3 to 5 years, meet what can be complex requirements based on an analysis of the debtor’s assets and income, and get approval from the judge and the chapter 13 trustee.
Taxes are usually discharged in a chapter 13 bankruptcy. There are multiple types of taxes that fall into one of two categories – priority and non-priority. Priority taxes must be paid in full through the chapter 13 and non-priority taxes are treated the same as credit cards. In most cases all taxes are discharged through chapter 13.
Most people can keep whatever assets they would like to keep, though sometimes it is best to get rid of certain assets that are unaffordable. If there is a loan associated with the asset, such as a car, the debtor can keep it so long as he or she can make the payments.
Sometimes it’s your circumstances that dictate which is right (for example, your income is too high for chapter 7). Through careful analysis and planning and being honest with yourself about your goals you can decide which is right.