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Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan.

Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

SECURED DEBT $1,081,400

Remove junior unsecured liens (lien stripping)

You can remove junior liens from your residence if the FMV of your residence is less than the principal amount you owe on the first mortgage.  When the first mortgage is underwater, the junior mortgages are in effect unsecured; there is no equity for the junior mortgages.  To remove the junior lien you must file a Chapter 13 Bankruptcy in Federal Bankruptcy Court.  This is the only sure way to decrease the amount you owe on your residence; and only works if you have junior liens that completely underwater.