How a Chapter 13 plan works
There is no set requirement that any specific amount of debt must be repaid in a Chapter 13 case. Many people pay an extremely small percentage of the total amount of debt, and the court discharges the rest.
Generally, your monthly payment will be determined by your disposable income — not by what you owe. An individual who files a Chapter 13 bankruptcy will be allowed to keep and use all of their property, because Chapter 13 does not involve a liquidation process.
Who qualifies
Not everyone qualifies for Chapter 13. A debtor must demonstrate a regular income that will allow them to make monthly payments to the bankruptcy trustee. There are also limits on the amount of debt a Chapter 13 filer may have.
Common reasons people choose Chapter 13
- Catching up on mortgage arrears over the life of the plan while keeping the home
- Addressing a financed vehicle through the plan
- Dealing with debts that are not dischargeable in Chapter 7, such as certain taxes
- Protecting property that could not be fully exempted in a Chapter 7 case
Completion matters
A Chapter 13 case only delivers its benefit if the plan is completed. That makes plan design — and realistic budgeting at the outset — one of the most important parts of the representation.
* From 2010 through 2019, only 5.6% of our Chapter 13 cases were dismissed after our client failed to complete the plan payments. The average dismissal rate for other firms in the Middle District of Pennsylvania over the same period was 46.7%.
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