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If you're an individual or a sole proprietor, you can file a Chapter 13 bankruptcy to pay off all or part of your debts over five years. Rather than wiping out debts immediately, this option allows you to reorganize them so you have time to pay.

Many people who file Chapter 13 bankruptcies have:

·         Mortgages or other loans they would like to bring current, so they don't lose their homes or other property
·         Taxes, child support or student loans that can't be wiped out by Chapter 7 bankruptcy
·         Moral convictions that all debts should be paid no matter how long it takes
For a Chapter 13 bankruptcy, you'll need a stable income with disposable income (income left over after you pay the bare necessities of life such as shelter, food and utilities).

The court will apply living standards, a means test, set by IRS regulations to determine what is reasonable for you to pay for living expenses, including housing and food, to find out how much you have available to pay your debts.

The filing of the Chapter 13 petition must be accompanied by a proposed payment plan extending up to five years. The proposed payment plan must provide for the payment of all "priority claims," such as taxes, in full. All tax returns for the four years prior to filing must be filed.

The bankruptcy trustee appointed by the Bankruptcy Court must review the proposed plan for accuracy and feasibility. The proposed plan is distributed to creditors, who have the right to object to the plan if it's unreasonable. If the plan is approved, you can keep all your assets during the period of the plan. You make monthly payments to the bankruptcy trustee, who distributes the funds to the creditors according to the plan. If the plan is completed as approved, your unpaid debts are "discharged."