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How does a Chapter 13 bankruptcy work?

Under a Chapter 13 bankruptcy a trustee is appointed by the bankruptcy court. The trustee examines future earning potential, by looking at the petitioner’s wages, assets, and any income-producing properties he or she may have. A plan of rehabilitation is proposed to the court and the creditors. The plan, if made in good faith, will be accepted or "confirmed" if it meets one of three possibilities: if the creditors agree to the plan; if the creditors receive the fair value of their claims; or if the plan pledges all of the petitioner’s disposable income for a period of three years.