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How Much Debt Must You Repay in a Chapter 13?


Chapter 13 is the lesser-known consumer bankruptcy. In Florida, about 3 out of 4 individuals file for Chapter 7 bankruptcy protection, which is much quicker than a Chapter 13, which can take three to five years.

Nevertheless, a Chapter 13 has its place, and we have helped countless debtors apply for Chapter 13 relief. One question many people have is how much debt they’ll need to repay if they choose the Chapter 13 option. The answer is complicated and depends on the specific debt that you have. Contact one of our Plantation bankruptcy attorneys for an individualized review.

Identify any Priority & Secured Debt

Not all debt can be discharged in bankruptcy. Some debts will need to be paid back 100%, such as:

  • Child support arrearages
  • Unpaid alimony
  • Most taxes
  • Secured debt, such as your mortgage and car loan (if you choose to hold onto the property)

Bankruptcy is not a good option if most of your debt is priority, since you will not be able to reduce it. However, you might be able to spread out any past-due amounts over the life of your payment plan, which gives you more time to get current. And because of the automatic stay, your creditor cannot take any collection action against you.

Calculate General Unsecured Debt

General unsecured debt typically includes credit card, medical debt, and personal loans. You will have to pay some of this debt back in a Chapter 13. Generally, the amount you pay will be the greater of the following:

  • Your disposable income. This is the amount you have left over every month after paying bills and priority/secured debts. Your unsecured creditors are entitled to 100% of your disposable income.
  • What your unsecured creditors would have received if you filed Chapter 7. Basically, this is the value of your non-exempt property.

For example, you might have an above-average income for Florida. After all expenses, you have $750 left over each month. You will need to contribute this amount each month for the duration of your payment plan (60 months). In total, you would pay roughly $45,000 to unsecured creditors.

However, you might have $60,000 in non-exempt property. If so, then you will need to repay this amount to your creditors, since it is the larger of the two numbers. If you can’t, then your plan cannot be confirmed.

Is Chapter 13 Right for You?

Whether to choose Chapter 13 depends on your debt and the amount of non-exempt assets you hold. In some states, debtors choose Chapter 13 because they do not want to lose their home. However, Florida allows most residents to exempt the full value of their primary residence, so this is rarely a consideration.

Instead, a Chapter 13 can be more helpful for Florida residents if they have priority debts that they can spread out over the life of their payment plan. Doing so can prevent foreclosure or garnishment actions.

If you have a question about what bankruptcy to file, please contact Nowack & Olson today. Our Plantation bankruptcy lawyers can meet for a free consultation to discuss which bankruptcy option fits best with your lifestyle. Call us today at 888-813-4737 to set up an appointment.




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