Which Payments will Stop When I File Chapter 13?

In Chapter 13 bankruptcy, the debtor will repay creditors over time in a repayment plan. Every debt situation is different, so the type of debt will determine how the bankruptcy trustee will distribute Chapter 13 payments. It is possible that not every creditor will receive full repayment for the entire amount owed over the life of the plan. This means that some payments to certain creditors may stop.

When is Chapter 13 Appropriate? 

If a debtor earns more than the median income in their state or the does not pass the means test, Chapter 13 bankruptcy may be the best option. Chapter 13 is most appropriate in the following situations: 

• The debtor wants to repay creditors - A repayment plan allows the debtor to pay creditors over time.
• The debtor wants to save their house from foreclosure - Chapter 13 will stop foreclosure proceedings and will allow the debtor to repay the past due amount in the plan.
• The debtor wants to stop the repossession of their car -  The debtor can repay the past due amount on the car loan in the repayment plan.
• The debtor wants to keep nonexempt property - In Chapter 7, the debtor has to turn over valuable nonexempt property to the trustee for sale and distribution, but in Chapter 13, the debtor can keep nonexempt property.
• The debtor wants to discharge certain debts that are not eligible for discharge in Chapter 7 - In Chapter 13, after the completion of the payment plan, the court will discharge debts incurred to pay nondischargeable tax debt, HOA fees, and court fees.

Which Payments Will Stop

Depending on the debtor’s situation, the debtor may have to continue paying all or most creditors. When a debtor files for Chapter 13, the debtor will submit a repayment plan to the court that prioritizes debt. The debtor will have to continue paying certain debts, such as priority debt, like support payments and most taxes, and secured debt, if they choose to keep the property. Unsecured creditors, like credit cards, may only receive a portion of the amount owed or nothing at all. It will depend on how much income the debtor has left after repaying other creditors. Once the debtor completes the plan, the court will discharge eligible debt, and the debtor will no longer owe those creditors.

Getting Legal Help with Your Bankruptcy Case

If you are considering bankruptcy as a way to eliminate debt or save your home from foreclosure, Chapter 13 may be an option. To find out what works best in your situation contact a bankruptcy attorney for more information and for an evaluation of your unique case.