How Does Chapter 13 Bankruptcy Deal with Unsecured Debt?

January 30th, 2013 by Reed Allmand

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a repayment plan approved by the court.  It helps debtors repay debt obligations within 3 to 5 years.  There are certain debts that are required to be paid through this plan.  The chapter is commonly filed by those wanting to keep property such as their home or vehicle while getting caught up on payments.

Certain debts have higher priority than others in Chapter 13.  Secured debt such as a mortgage or vehicle loan are included in your repayment plan.  If you have missed payments in which you are facing foreclosure or repossession, Chapter 13 can help you make payments you missed by repaying overtime.  As long as you make these payments according to your plan you’ll be able to keep your property.

Other debts that are priority in Chapter 13 bankruptcy include back child support, spousal support or alimony and back taxes.  When a debt is a priority in bankruptcy it is required to be paid.  Unsecured debt in Chapter 13 may not be considered a priority, yet depending on the amount of disposable income you have left over you may be required to place it toward the debt.  Disposable income is what you have left over after making necessary payments.

Unsecured debt in Chapter 13 would be discharged as long as the debtor makes required payments during the repayment plan period.  Payments made to unsecured creditors depend on what you can afford, not by the amount of debt owed.

Reference: http://www.thebankruptcysite.org/legal-advice/bankruptcy/chapter-13/what-happens-unsecured-debts-chapter-13-bankruptcy-filing

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About Reed Allmand

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Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."

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When we modify your bankruptcy plan we are changing your plan payments. This means that we have to get with your employer and change the terms and amount of your wage order. The only way we can do that is by filling out a new wage order form.  

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