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.
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.