When you file for Chapter 13 bankruptcy, you commit to a repayment plan that lets you pay off certain debts over time. This plan helps you catch up on missed payments while keeping your property. Knowing which debts you can include in the plan helps you make smart choices about your financial future.
Secured debts
Secured debts connect to specific property, like your car or home. In a Chapter 13 plan, you include these debts to catch up on missed payments and prevent repossession or foreclosure. For example, if you fall behind on your mortgage or car loan, the plan lets you repay those past-due amounts over three to five years while keeping your property. You continue making regular payments on these items during the plan.
Unsecured debts
Unsecured debts do not involve collateral and also fit into most Chapter 13 plans. These debts include credit card bills, medical debts, and personal loans. You may not repay these debts in full, but Chapter 13 lets you pay a portion based on your income and disposable funds. After you complete the plan, the court wipes out the remaining balance on most unsecured debts.
Priority debts you must pay in full
Some debts receive special treatment under bankruptcy law. Priority debts include child support, alimony, certain taxes, and wages owed to employees. You must pay these debts in full through your Chapter 13 repayment plan. Because the law does not reduce or erase these obligations, they take priority over other types of debt in your repayment schedule.
How your repayment structure works
The court reviews your income, expenses, and total debt to approve your repayment plan. The plan aims to help you stay current on important obligations while paying your unsecured debts fairly. When you follow the plan, you rebuild financial stability and protect your assets while staying in control of your money.
