Chapter 13 bankruptcy is one of the most often used. It is similar to a Chapter 7, but it does not have income limits.
It involves liquidating the assets of the debtor and making payment arrangements over a longer period of time than Chapter 7. Chapter 13 allows a debtor to propose a schedule for repaying debts that seems reasonable to the bankruptcy judge.
It is for individuals who can prove steady income. Often Chapter 7 is filed by people who are impoverished, while Chapter 13 is the middle-to-upper class equivalent.
The debts are not paid off at one time, generally, but on a schedule of a few years. Part of the reason that Chapter 7 doesn’t have a drawn out repayment schedule is because there in no income to support it. For Chapter 13, there is an income to support a repayment schedule.
Chapter 13 insulates the debtor from any future lawsuits or solicitations from the creditors named in the filing by establishing a trust, to which the debtor pays the debt service payments. The creditors are only permitted to take up their business with the trustee.