What happens to debt under a Chapter 13 bankruptcy?

Under a Chapter 13 bankruptcy, debts are restructured for repayment. This type of bankruptcy is designed to allow individuals with a regular income to create a plan to repay all or a portion of their debts over a period of three to five years.

Rather than discharging debts outright, Chapter 13 allows individuals to keep their assets while making manageable payments to creditors based on their income and expenses. The repayment plan is submitted to the court and must be approved, after which the debtor makes monthly payments to a trustee, who then distributes those payments to creditors according to the terms of the plan.

In contrast, immediate debt dismissal would mean that the debts are erased, which is not the case in Chapter 13. The requirement to liquidate all assets pertains to Chapter 7 bankruptcy, not Chapter 13. While some debts may indeed become unsecured in certain situations, Chapter 13 primarily focuses on restructuring debts rather than altering their secured or unsecured status.