Chapter 13 is similar to a Debt Consolidation Plan with several big exceptions. First, you do not ordinarily have to pay back all of your debts. Second, your Creditors have no choice but to accept your Chapter 13 Bankruptcy Plan provided it complies with the Bankruptcy Code. Third, you will only make one monthly payment to the Chapter 13 Bankruptcy Trustee and she will disperse payments to your Creditors.
In most Chapter 13 Bankruptcy Cases, an individual is only required to pay back a small percentage of their unsecured debs WITHOUT further interest or penalty. In many cases, that percentage is as low as 1%. For example, if a person owed $100,000.00 on Credit Cards, in a 1% Chapter 13 Bankruptcy Plan they would only be required to pay $1,000.00 to the Credit Cards over a period of 3 to 5 years. In a 60 month Plan, the payment to those Credit Cards would only be $17.00 per month and at the end of the 60 months, the balances go away.
In addition to Credit Cards, car payments, mortgage arrears and certain other Debts are paid through the Chapter 13 Bankruptcy Trustee. This means that, rather than making numerous payments to Creditors, you will make one payment to the Chapter 13 Trustee who will, in turn, make payment to those Creditors entitled to payment under the terms of your Plan. If you so choose, you can also have the Plan payment deducted from you paycheck so that you don't even have to worry about making the Plan payment.