14 FAQs on chapter 13 bankruptcy - DebtCC (2024)

FAQs

What percentage of your debt do you pay in Chapter 13? ›

This is known as a percentage plan and can vary from 1% - 99%. A 100% plan indicates that the petitioner does not qualify for debt reduction based on their income and ability to pay. This Chapter 13 plan structures 100% of that client's debt to be paid back through the repayment process.

Chapter 13 should never be filed without a lawyer. Chapter 13 cases filed with an attorney already have only a 33% success rate; that number drops to a 2.3 % success rate without a lawyer. In fact, many bankruptcy trustees will tell you they have never seen a successful Chapter 13 case where a debtor was unrepresented.

In Chapter 13 bankruptcy, your debt-to-income ratio is used to determine the feasibility of your proposed repayment plan. Your monthly income must be sufficient to cover your monthly debt payments, as well as your living expenses.

The benefit of Chapter 13 is that you stop accruing debt, and you often get to pay pennies on the dollar. For instance, if you owe $15,000 in medical debt, you may only pay a fraction of that. The court may discharge the remaining amount you aren't able to pay over the years.

Here's why. When you proposed your Chapter 13 plan, you calculated the interest amount you'd need to pay creditors. If you miss a payment, your mortgagor or possibly another creditor will assess a late fee and other penalties, increasing the amount of money the trustee would need to keep your payment current.

At a minimum, all Chapter 13 filers must pay unsecured creditors an amount equal to the filer's nonexempt property—the same amount that would get sold in a Chapter 7 case.

The court reviews your assets and income when deciding whether to approve your plan, and the plans don't leave a lot of room for luxuries. Chapter 13 cases require a lot of motivation to carry through three to five years of voluntary austerity, but that's just one reason they fail.

The court may deny an individual debtor's discharge in a chapter 7 or 13 case if the debtor fails to complete "an instructional course concerning financial management." The Bankruptcy Code provides limited exceptions to the "financial management" requirement if the U.S. trustee or bankruptcy administrator determines ...

Chapter 13 Eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's combined total secured and unsecured debts are less than $2,750,000 as of the date of filing for bankruptcy relief. 11 U.S.C. § 109(e).

No Income Limits for Chapter 13 Bankruptcy

In Chapter 13, you'll pay into a three- to five-year repayment plan. After completion, the bankruptcy court will discharge most remaining unsecured debt balances.

What is the minimum debt for Chapter 13? ›

There is no minimum amount of debt you must be in to file for Chapter 13 bankruptcy. However, your combined secured and unsecured debt cannot exceed $2,750,000 on your filing date, per the United States Courts. Chapter 13 allows you to create a plan to repay your debt given that you make a consistent income.

Under Chapter 13, you also have the $550 cash exemption along with a wildcard exemption up to $1,475, allowing you to keep $2,025 in cash under Chapter 13. However, when filing for Chapter 13 bankruptcy, you can claim and exempt 75 percent of the wages you earned in the preceding 30 days.

The Minimum Percentage of Debt Repayments In A Chapter 13 Bankruptcy Is 8 To 10 Percent.

Chapter 13 is only available for people who owe less than the Chapter 13 debt limits, which are $1,395,875 of secured debt and $465,275 of unsecured debt for cases filed between April 1, 2022, and March 31, 2025.

Your bank account will generally remain unaffected by the filing, allowing you to manage your daily finances as usual. Credit Unions, under Michigan Law, do have a one-time right to set-off whatever funds are on deposit in your account on the date of the filing.

Whether it's a Chapter 13 or 7 or 11, no bankruptcy filing eliminates all debts. Child support and alimony payments aren't dischargeable, nor are student loans and most taxes.

In contrast, Chapter 13 bankruptcy puts your debts together into a “plan” to repay the debts over a five year period. Rather than any “negotiation” taking place between the court and each creditor, a formula called the “Means Test” is used to create a monthly payment.

If you incur debt without prior court approval, you can try to get the court to approve the debt later by showing that it was not possible to get court approval ahead of time. You will also have to get the creditor to agree and to submit a proof of claim. At that point, you can include the debt in your plan.