To qualify for a discharge in a Chapter 7 Bankruptcy, you have to meet what is called the Means Test, which is basically a calculation to determine how much money you have left over after expenses each month to pay creditors. If you have too much disposable income, you will not be able to file a Chapter 7 Bankruptcy. If this is the case, a Chapter 13 may be for you. In a Chapter 13 Bankruptcy, you make monthly payments to the Trustee, who repays creditors out of those payments. The amount of these payments is calculated similar to the Chapter 7 Means Test calculation by comparing your income and expenses. These payments are made each month for three or five years, depending on your income. After the completion of the plan, you receive a discharge for all unpaid debt. The amount of your debt and monthly income determine how much your creditors get paid.
The Chapter 13 Plan is created by your Chapter 13 Bankruptcy Attorney. The plan states how much you will pay each month and how much your creditors receive. It also states what you elect to do with property you own. For example, if you own a second property that is worth less than you owe, you can choose to surrender that property.