Chapter 13 Bankruptcy is a great option for people that are in financial despair. If you have credit card debt, then filing a Chapter 13 will typically allow you to discharge all of that debt just as if you were filing for protection under Chapter 7. Also, if you have IRS debt then you can typically pay that back at zero percent interest over a five year time period through the Plan.
Also, if you financed your vehicle over 2.5 years ago then you may be able to “cram down” the loan. That means you may be able to pay the value of your car rather than the amount owed on the loan. That almost always reduces the amount of the monthly payment. Cram downs are extremely beneficial if you have rolled some negative equity into a car loan in the past.
Another thing you can pay back over a five year time period through a Chapter 13 Plan is the arrears on your house. Many people choose to file a Chapter 13 bankruptcy over a Chapter 7 even if they pass the Means Test because they are seeking 5 years to pay the back payments on their house to avoid foreclosure.
Of course, you will have to continue making the regular monthly payments directly to the mortgagee bank after you file the petition in order to maintain your interest in the homestead. However, once you eliminate your other monthly costs by discontinuing the payments on your medical bills, credit card bills, other unsecured loans, and most of the time reducing your monthly payments on the vehicles that is extremely affordable and well within your budget.