Creating a Realistic Chapter 13 Repayment Plan: Paying Your Minimums Skip to main content

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Creating a Realistic Chapter 13 Repayment Plan: Paying Your Minimums


Chapter 13 bankruptcy can be a great way to clear your financial slate, while, at the same time, entitling you to hold on to your precious property even in the most precarious economic situations. To do so, Chapter 13 bankruptcy allows you to construct what is hopefully a realistic financial reorganization plan that allows you to pay back all of your debts over the course of three to five years.

In part one of the series “Creating a Realistic Chapter 13 Repayment Plan,” we discussed how an unrealistic Chapter 13 repayment plan (i.e., one that is poorly designed, doesn’t account for unexpected expenses, and one that doesn’t keep your lawyer in the loop, combined with the debtor’s inability to stay inside a repayment ‘budget’), can lead to Chapter 13 failure. In the second part of the series, we’ll look at the importance of going beyond the bare minimum when considering a Chapter 13 repayment plan.

Under most Chapter 13 plans, debtors are expected to pay either nothing or only pennies on the dollar of their remaining unsecured debts, which are often a huge draw for people wanting to save their homes or hold on to their vehicles in bankruptcy. However, Chapter 13 does require you to pay what is required under the Means Test (usually nothing, if you have an experienced attorney knowledgeable in means  test planning).  There are some things you'll have to pay through your Chapter 13 plan, regardless of your Means Test result.  Included in these are: arrears on domestic support obligations (alimony, child support, etc); back mortgage payments for homeowners attempting to save their shelter; certain nondischargeable taxes; and the value given to non-exempt assets.

It is important to note that these minimum payments, based on what they are, when they are, and where they are, can get you into trouble, such as:


The lengthy duration of your plan.

Your entire plan must be paid within five years. As a result, plans lasting the full five years create a situation where debtors must be accountable for a certain amount for an entire 60-month period. At first blush this might sound feasible, even preferable, to extend your plan for the entire duration allowed; but given the preponderance of incidences whereby unexpected expenses have caused Chapter 13 debtors to miss payments and fail their extended plans, it is advisable to look for a reasonable plan in the shortest period possible.

The poor timing of your largest payments.

In addition, it is also recommended that you avoid a plan that includes a schedule beginning with relatively low payments and an obligation to then increase payments toward the plan’s end. Why? The same old “unexpected expenses” scenario: a job loss, an underwater home, a new medical emergency paired with a repayment plan that puts the meatier payments at the end makes for a dangerous situation where the coffers are bare when the planned increased payments comedd calling.

Because of these two basic repayment plan pitfalls, many Chapter 13 cases are dismissed or converted into Chapter 7 liquidation bankruptcies, causing debtors to lose assets and their payments up to that point. As a result, when considering the benefits of Chapter 13, it’s also important to mindful of the basics of the repayment process, giving you the right kinds of ammunition to avoid an unrealistic plan while on the path to a better financial future.

As a result of the intricacies of Chapter 13, it is essential to consult with a qualified attorney before entering into your bankruptcy filing. A qualified bankruptcy attorney is important during the bankruptcy process to help you navigate any uncertain waters and work in your best interests during the duration of your personal bankruptcy. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at Simply click on the yellow “FREE Consultation Now” button.

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