Chapter 13

• Under a Chapter 13 bankruptcy, you make a monthly or biweekly payment to your court-appointed trustee equal to your disposable income, which is your income minus court-approved living expenses. Your trustee distributes that money to your creditors. Secured debt payments are made first, such as a home or vehicle loan. Any remaining funds are apportioned to your unsecured debt creditors. If they cannot be paid in full, the amounts of your unsecured debt are settled or discharged accordingly. For example, if 50 percent of your unsecured debt is to Bank of America and you have $400 remaining from the monthly payment you make to your court-appointed trustee, Bank of America would be required to settle your debt for $200 per month.
  
  

Canceling

• It is your right to cancel your bankruptcy petition at any time without a court hearing. You might opt to do this if your creditors successfully file for the right to repossess assets you want to keep or you decide you would rather file a Chapter 7 bankruptcy in which all your assets are liquidated.
  
  

Warning

• Should you cancel your bankruptcy petition, your debts still will be your responsibility, including any arrears and penalties. You'll also be liable for any default interest rates that may have gone into effect because of nonpayment. As such, your assets will be subject to foreclosure or repossession, so you should be certain before canceling.
  
  

Legal Rights

• Any payments you made to your court-appointed trustee will be returned to you after canceling a Chapter 13 bankruptcy, less any disbursements and trustee and administration fees. Your creditors may resume collections activities and you could be sued or have your wages garnished. Further, you will be unable to file for bankruptcy until 180 days have passed since the date your Chapter 13 petition was cancelled.