If you are considering bankruptcy as a way to resolve your debt problems, you should already know that there are different types of bankruptcy that achieve different goals. If, for example, you want to wipe out all or most of your debt and start fresh, you may want to pursue Chapter 7 bankruptcy. But if you would prefer to repay debt and have the means to do so, Chapter 13 may be the answer.

Chapter 13 bankruptcy allows people to re-prioritize debts and come up with a plan to repay much or all of their debt. You may be wondering how this is done and why creditors would approve of such a plan if there is a chance that they will not be fully repaid.

To answer the first part, we need to take a step back and first note that you will need to meet with your creditors if you wish to pursue Chapter 13. You don’t have to do this alone; you can have your attorney present and there will also be a court-appointed trustee present. During this meeting, you, the trustee and your creditors will create, challenge and/or approve a repayment plan.

The plan will reflect how and when different debts will be paid off. Priority debts will paid first — and often in full — followed by secured debts and then unsecured debts. These last two types of debt may not be paid off completely.

This is where many people ask why creditors would approve of a plan that does not reflect full or significant repayment. The short answer is that these plans typically end up with creditors (even unsecured creditors) getting paid more money than they would if a person continued to not pay or chose to file for Chapter 7 bankruptcy instead.

Hopefully, this blog post provides readers with some basic information on the process and goals of Chapter 13, though there is much more that people will need to know. For more specific details and guidance on individual claims, it can be wise to discuss your case and questions with an attorney.

Source: United States Courts, “Chapter 13 – Bankruptcy Basics,” accessed on July 24, 2015