Chapters 13 has been introduced as a type of bankruptcy filing for individuals with a fair income, keeping in mind their intent to pay their debts but are unable to do so in a timely manner. The underlying principle of Chapter 13 is to facilitate financially distressed individual debtors to propose and carry out a settlement plan under which creditors are paid over an extended period of time. Upon filing for Chapter 13 discharge a person can expect the following advantages and disadvantages.

On filing for a Chapter 13 discharge, barring a few prominent exceptions, all other ongoing legal actions against the debtor are stopped. A creditor is prohibited from carrying out new legal actions against the debtor. It also stops creditors from corresponding with the debtor, or any person except the debtor's lawyer, to discuss or ask for collection of a debt. Often, it is observed that liabilities relating to credit card debts, civil judgments, past-due accounts, and rulings due to repossessions and foreclosures may be settled in this manner. Similarly, by filing for Chapter 13 people can also expect to keep all or majority of their property through federal or state exemptions. However, a person can only expect to evade certain liens and specific involuntary transfers such as garnishments if timely action has been taken.

Filing of Chapter 13 has a number of cons. A person should only rely on the same as a last resort. A person filing for Chapter 13 bankruptcy should be prepared to face a number of undesirable consequences. Amount relating to certain taxes, governmental fines, forfeitures and reimbursement, child and spousal support, or drunk driving may not be dischargeable. Creditors who have security interest in a home or in motor vehicles may be able to retrieve their collateral after the bankruptcy unless the debtor reaffirms the debt. Bankrupt candidates should not expect to obtain easy credit in the future. Disrepute may be associated with bankruptcy, which views a debtor as being financially or socially negligent. As such, a person should be mentally prepared to accept the same. Along with this, a person can also expect significant tax consequences from a bankruptcy.

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