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Do You Have to Repay All of Your Debt in Chapter 13 Bankruptcy?

Posted By Allmand Law Firm, PLLC || 2-Aug-2013

Chapter 13 bankruptcy helps debtors reorganize debt obligations into an affordable 3 to 5 year repayment schedule. The amount you pay depends on a few factors such as your monthly income and the type of debt. Some debtors are under the impression that they must repay all of their debt under this plan. In many cases, this isn't true but certain debts may require you to pay what is owed.

A Chapter 13 plan is created upon reviewing the type of debt you have. This will provide clarity in understanding which debts likely need to be paid in full. Priority debts are those in which you are required to pay in full. These include financial obligations such as spousal/child support or recent income taxes. If you are filing to help keep your house, mortgage defaults should be paid completely. The mortgage payment is also considered a secured debt, such as a vehicle loan or a loan with collateral attached. If you want to keep the collateral you may be required to pay or catch up on default payments to avoid repossession or foreclosure.

So what about unsecured debt? These are obligations such as credit card debt, medical bills, and personal loans. Depending on how much disposable income you have remaining after paying priority debts, such funds may be directed toward paying down unsecured debt. At the end of your plan, any remaining unsecured debt may qualify for discharge.

Categories: Chapter 13 Bankruptcy
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