Chapter 13 bankruptcy is a viable option for those who don’t qualify for Chapter 7 bankruptcy or who have valuable personal property that they would like to protect. There is no liquidation requirement in a Chapter 13 filing, which means you don’t have to sell off or refinance your property to pay your creditors.
However, you will have to complete a repayment plan. Your unsecured creditors will all receive payments through the courts until you complete the bankruptcy process. For 3 years, possibly longer, you will need to make monthly payments on the unsecured debts that will be part of your discharge at the end of the bankruptcy.
How much will those payments cost every month?
Your debts and income influence the payment amount
There is no set amount that you have to pay toward unsecured debts in a bankruptcy filing. Instead, how much you allocate to repay your unsecured debts will largely depend on how much you currently owe and your income.
The courts will typically expect you to provide thorough information about your household budget. You then have to attend a meeting with the trustee appointed by the courts and the creditors interested in your case.
During that meeting, you will negotiate a repayment plan. The trustee will typically expect you to commit the vast majority of your disposable income every month toward payments. Creditors will usually push for as much payment as possible, and the trustee will be the one responsible for determining how much each creditor will receive from each monthly payment you make.
There may be very little excess money left in your budget after covering basic expenses and making your monthly payment. Still, when you complete the payments as negotiated, you can then move forward with a discharge of the remaining balance on those debts.
Short-term inconvenience leads to long-term benefits
It can be hard to adjust to a very tight budget you will likely have during a Chapter 13 bankruptcy. However, as long as you carefully manage your finances and make all of the necessary payments, you will be able to reduce your debts and monthly payments in the future.
Learning more about the unique rules for Chapter 13 bankruptcy proceedings can help those trying to regain control over their debt.