Table of Contents
- Chapter 13 Bankruptcy: The Repayment Plan in Detail
- What Is Chapter 13 Bankruptcy?
- Who Qualifies for Chapter 13?
- How the Repayment Plan Works
- What Gets Paid First?
- Key Benefits of Chapter 13
- Drawbacks to Consider
- How Chapter 13 Compares to Chapter 7
- What Happens After Plan Completion?
- How to File Chapter 13
- Why You Need a Bankruptcy Attorney Near You
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Navigating the complexities of debt can be daunting, but Chapter 13 bankruptcy offers a viable solution for individuals looking to safeguard their assets while repaying debts over time. With the guidance of a qualified bankruptcy attorney near you, you can create a structured repayment plan that helps you regain financial stability.
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Discover how Chapter 13 bankruptcy allows you to restructure and repay your debts while protecting your assets. Learn who qualifies for this repayment plan and why consulting a bankruptcy attorney near you can help you navigate the complexities of the process effectively.
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Chapter 13 Bankruptcy: The Repayment Plan in Detail
When you’re facing debt but want to keep your home, car, or other important assets, Chapter 13 bankruptcy may be the right path. Also known as the “wage earner’s plan,” Chapter 13 allows you to restructure and repay your debts over time—without losing the things you’ve worked hard for.
In this post, we’ll break down exactly how Chapter 13 bankruptcy works, who qualifies, what the repayment plan looks like, and why it might be a better option than Chapter 7 for some people. If you’re feeling overwhelmed, don’t worry—we’ll keep it clear and easy to follow.
💡 For every post in this series, scroll down to “Related Posts.”
What Is Chapter 13 Bankruptcy?
Chapter 13 is a federal bankruptcy option designed for individuals who have regular income but are falling behind on bills, mortgages, car loans, or other debts. Rather than liquidating your assets like in Chapter 7, you commit to a 3–5 year court-supervised repayment plan that helps you get current and stay protected from creditors.
Who Qualifies for Chapter 13?
To file Chapter 13, you must:
- Have regular income (employment, self-employment, Social Security, etc.)
- Have unsecured debts under ~$465,275 and secured debts under ~$1,395,875 (limits as of 2024)
- Be current on your tax filings
A bankruptcy attorney near you can help you calculate your eligibility and prepare your repayment plan.
How the Repayment Plan Works
The centerpiece of Chapter 13 is the repayment plan. Here’s how it works:
- You propose a plan to repay some or all of your debts over 3–5 years.
- The amount you pay depends on your income, expenses, and the type of debts you owe.
- The court must approve the plan, and you make monthly payments to a trustee who distributes funds to creditors.
What Gets Paid First?
- Priority Debts: These include taxes, child support, and bankruptcy attorney fees—these must be paid in full.
- Secured Debts: You’ll make payments on things like mortgages or car loans, and may be able to catch up on past-due amounts.
- Unsecured Debts: Credit cards, medical bills, and personal loans may get only partial payments—or nothing at all—depending on your income and exemptions.
Key Benefits of Chapter 13
- Stops foreclosure and repossession
- Lets you catch up on mortgage or car payments
- Protects your assets
- May reduce or eliminate some unsecured debt
- One manageable monthly payment
Drawbacks to Consider
- You’ll be in bankruptcy for 3–5 years
- Missing payments could cause your case to be dismissed
- Requires discipline and budget management
How Chapter 13 Compares to Chapter 7
- Chapter 13 is ideal for people with assets they want to protect or income too high to qualify for Chapter 7
- Chapter 7 offers faster debt discharge, but may involve asset liquidation
Learn more in Chapter 7 Bankruptcy: Liquidation Basics if you're trying to decide between the two.
What Happens After Plan Completion?
Once your repayment period ends and all required payments are made, you receive a discharge of any remaining qualifying debts—just like in Chapter 7. You’ll also emerge with a stronger financial footing, having protected your property and made progress toward financial stability.
How to File Chapter 13
- Complete pre-filing credit counseling
- File your bankruptcy petition and proposed plan
- Attend a 341 Meeting of Creditors
- Make monthly payments
- Complete a financial education course
- Receive discharge upon plan completion
Learn more about these steps in Key Bankruptcy Court Procedures: An Introduction to the Judicial Process.
Why You Need a Bankruptcy Attorney Near You
Chapter 13 cases are complex. A local bankruptcy attorney near you can help:
- Propose a repayment plan that protects your interests
- Ensure the plan complies with court and trustee rules
- Maximize exemptions and minimize payments
- Keep you on track during your repayment period
ReferU.AI helps you find an experienced bankruptcy attorney near you who understands federal law and your state’s specific rules. Our AI-powered platform ensures you get matched with the right legal partner for your case.
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