Our Bankruptcy Blog

Understanding Chapter 13 Repayment Plans

If you’re considering filing for bankruptcy, you may be wondering about the different debt repayment options available.

Chapter 13 bankruptcy allows debtors to create a repayment plan to repay their creditors over a three- to five-year period.

Here’s what you need to know about how these repayment plans work.

What is a Chapter 13 Repayment Plan?

Chapter 13 repayment plans are designed to allow those with financial hardship an opportunity to pay off debt while reorganizing their finances.

The process begins with the filer’s assets and total debt, after which the court will establish a monthly payment plan for repayment over 3 – 5 years.

During this time, creditors are prohibited from contacting the filer, making unauthorized withdrawals, or taking more than what is allowed under the repayment plan.

Additionally, any remaining balance of unsecured debts get discharged at the end of the repayment period so long as all payments were made on time.

Chapter 13 repayment plans can provide much-needed relief for struggling individuals through budgeting and debt consolidation.

How to Qualify for a Repayment Plan

If you’re struggling financially and need relief from overwhelming debt, a Chapter 13 bankruptcy repayment plan may be the right option for you.

To qualify, you’ll need to demonstrate a regular income and satisfy certain eligibility requirements. You must have less than $419,275 in secured debt and less than $1,257,850 in unsecured debt.

Furthermore, if married filing jointly, you and your spouse’s combined debts cannot exceed these amounts.

Additionally, you must have money available each month to pay off some of the debt.

If approved for a repayment plan by the courts, this money will go toward paying creditors over a three-to-five year period—ultimately helping you get back on track financially.


Calculating a Chapter 13 repayment plan


Benefits of a Chapter 13 Repayment Plan

A Chapter 13 repayment plan can provide an effective solution for those struggling with paying off their debts.

With this pathway, individuals can reduce interest rates and fees to provide manageable monthly payments that fit their budget.

When the debt is paid in full through the court-approved payment plan, any remaining balance after a discharge will be forgiven.

Furthermore, this option has the added benefit of allowing individuals to keep assets like their cars and homes that would normally be sold off during other bankruptcy proceedings.

Ultimately, Chapter 13 repayment plans enable those with debt to gain a fresh financial start while still maintaining vital personal possessions.

Drawbacks of a Chapter 13 Repayment Plan

Filing for Chapter 13 bankruptcy can provide an individual with much-needed relief from their debt, but also comes with drawbacks.

A Chapter 13 repayment plan may stretch out over three to five years, and individuals must make monthly payments for this entire period in order to obtain a discharge of their debt.

Further, most debts incurred during the case must be paid in full – including any arrearages on unpaid mortgages or car loans and any taxes that haven’t been discharged by other means.

Even secured debts purchased after the filing of the bankruptcy – such as furniture or equipment – may be subject to being included in the repayment plan.

Finally, filing a Chapter 13 requires thorough financial documentation, including tax returns and pay stubs, which some filers may find difficult to produce due to lack of records or delinquent taxes.

How to Make it Work for You

Creating a successful Chapter 13 repayment plan is key to getting out of debt in a reasonable amount of time. One of the best ways to make such a plan work for you is to rework your budget and accurately estimate how much you can contribute each month towards repaying your unsecured debts.

Utilize any extra funds or reductions in costs whenever possible and create realistic goals that are achievable and measurable, so that when it comes time to review and evaluate your progress, you know exactly where you stand.

Communicate with your creditors if the terms of the repayment plan don’t fit your current financial situation or circumstance. They will likely be willing to reexamine them and adjust accordingly if necessary.

Most importantly, ensure that you remain disciplined and diligent as you work through the repayment plan as this is instrumental in making sure it succeeds.


hiring an attorney to help file bankruptcy


Hiring an Experienced Bankruptcy Lawyer

It’s important to hire an experienced bankruptcy attorney as one of the steps to take when you’re facing bankruptcy and you need solid guidance and representation.

This is because there are many different types of bankruptcy. Only an experienced lawyer will know which one would work best for your specific situation.

It might seem like it makes sense to do this yourself. But most people don’t have the time or patience to understand all of the intricate details involved in bankruptcy.

That means they make mistakes by not choosing the right type, or by not filling out paperwork correctly. Both things could lead to delays and ultimately hurt your chances of getting any debt relief at all.

This is not a journey to take lightly, but it is also not one to take alone. If you need to file for bankruptcy, reach out to us today to start your journey with us.

If you want to learn more about the options you have and the steps to take, call us for a free consultation.


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Parker and DuFresne