Unsecured Debts in Chapter 13 Bankruptcy
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Unsecured Debts in Chapter 13 Bankruptcy

If you're buried under a pile of debt, chances are you've sought ways to get your finances in order. You may have also discovered that Chapter 7 bankruptcy is designed to eliminate unsecured debt.

In addition to Chapter 7, though, unsecured debt may also be eliminated through Chapter 13 bankruptcy, albeit in a different fashion. By filing for Chapter 13, you may be able to catch up on loan payments and potentially discharge some of your debts.

To connect with a local attorney to learn more about your unsecured debt relief options and Chapter 13 bankruptcy, just fill out the brief form below. You can arrange a free, no-obligation consultation with a lawyer near you today.


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Chapter 13 Bankruptcy and Debt

Once a Chapter 13 bankruptcy is filed, the filer and the bankruptcy court will reorganize the filer's debts into a single payment plan. This plan will be designed based on what the filer can actually afford, to help them regain financial stability.

In addition, they will make regular payments on a reorganized debt payment plan to a bankruptcy trustee, who deals with the creditors.

By making regular payments on this Chapter 13 payment plan, you may be able to:

  • Prevent home foreclosure
  • Stop car repossession
  • Eliminate many unsecured debts

If, at the end of the payment plan, the debtor has made consistent and timely payments, the bankruptcy court may choose to discharge remaining unsecured debts that haven't already eliminated those debts through the Chapter 13 process.

Moreover, even if unsecured debts remain, with other debts taken care of, these other debts may be handled with more ease.

One caveat, however, is that Chapter 13 is designed for people with steady sources of income. If you do not have a regular income, then filing for Chapter 7 bankruptcy may be a better debt elimination strategy.

Through Chapter 7, you may be able to eliminate a wide range of unsecured debts, including:

Chapter 13 may allow to you include all of these types of debt plus a few others that are typically not dischargeable in Chapter 7:

  • Missed child support or alimony payments
  • Certain taxes
  • Mortgage arrears
  • Parking tickets
  • Student loans (in rare cases)

Chapter 13 Unsecured Debt Limits

Some bankruptcy filers are also concerned about the debt limit associated with bankruptcy. In other words, how much debt can you take into the bankruptcy process?

While the rules periodically adjust for consumer inflation, Chapter 13 bankruptcy currently (as of February 2011) allows for roughly $360,000 in unsecured debts. In addition, the limit for secured debt is around $1 million. You are well advised, however, to check with a local bankruptcy lawyer about the specific limit.

Getting rid of unsecured debt through Chapter 13 bankruptcy may allow you to press the "restart" button on your financial life. The process, however, involves an intricate knowledge of federal and state bankruptcy laws.

To learn more about your unique financial situation, and to ask questions about unsecured debt and Chapter 13, contact a local bankruptcy lawyer today.

Laws may have changed since our last update. This is for informational purposes only and is not legal advice. For legal advice on your particular situation, talk to a local attorney.


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