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Do you need to make payments in a Chapter 13 bankruptcy?

On Behalf of | Jun 11, 2022 | Bankruptcy And Debt Relief

What the average person knows about bankruptcy is often vague and may possibly be inaccurate. For example, people don’t realize that there are several different kinds of bankruptcy available to individuals.

They may think that the same rules apply to a Chapter 7 filing as to a Chapter 13 filing, when nothing could be further from the truth. People consider Chapter 13 bankruptcy when their income is too high to qualify for Chapter 7 proceedings or when they have properties that they cannot exempt from liquidation and do not want to lose.

Chapter 13 bankruptcy is a wage earner’s plan, and it is a longer process than a Chapter 7 filing. Will you have to make regular payments on your unsecured debts as part of a Chapter 13 bankruptcy?

Yes, Chapter 13 filings require payment plans

One of the big differences between Chapter 13 and Chapter 7 bankruptcy is that Chapter 13 bankruptcy requires a structured payment plan before the courts will discharge your debts. You will need to pay a significant amount of your monthly disposable income to qualify for a discharge.

Typically, individuals wanting to discharge unsecured debt will need to attend a creditor meeting and negotiate payment plans with representatives from their creditors and the court-appointed trustee overseeing their filing. They will then make payments directly to the trustee every month and the trustee will distribute those funds among the creditors.

Provided that you complete the repayment process, you will be able to discharge the remaining balances on those unsecured accounts after the completion of the repayment plan. Learning more about the rules that govern Chapter 13 bankruptcy filings can help you to decide the best solution for your current financial situation.