Many people come to us with the same question: What debts are included in Chapter 13? They want to know whether their credit cards, medical bills, taxes or missed mortgage payments can all be addressed in one bankruptcy case. The answer is yes, every debt must be listed when you file. However, not every debt is treated the same way. Some debts must be repaid in full, others may only require partial repayment and some are generally not discharged. At The Socal Bankruptcy Law Firm, we help clients understand how each debt may be handled before they file.
What Debts Are Included in Chapter 13?
When you file Chapter 13, you do not choose which debts to include. All debts must be disclosed. The Bankruptcy Code then divides them into three categories:
- General Unsecured Debts
- Secured Debts
- Priority Debts
The category determines how each debt is handled throughout your repayment plan.
1. General Unsecured Debts: Often Receive the Most Relief
General unsecured debts are often the reason people begin looking into Chapter 13 bankruptcy. This category usually includes credit card debt, medical bills, personal loans, store accounts, unpaid utility balances, old apartment debt and civil judgments.
We often explain that general unsecured debts are not always repaid in full. How much you pay depends on your disposable income, any non-exempt property and the requirements of the Bankruptcy Code. In many Chapter 13 cases, unsecured creditors are paid only a portion of what you owe. Once you successfully complete your repayment plan, any remaining eligible balances may be discharged.
2. Secured Debts: Can Help You Keep Important Property
Many people considering Chapter 13 are worried about one thing above all else: keeping their home or vehicle. Because those debts are secured by collateral, Chapter 13 can often provide a path to catch up instead of falling further behind.
- If you are behind on your mortgage, you may have three to five years to repay the missed payments while staying current going forward.
- If you have a car loan, it can often be included in your repayment plan.
- If your vehicle is worth less than the remaining loan balance, you may qualify for a cramdown that reduces the secured amount.
- If you have a second mortgage, lien stripping may be available when legal requirements are met.
No two bankruptcy cases are exactly alike. We review your income, debts and property carefully to determine which of these options may be available in your situation.
3. Priority Debts: Usually Must Be Paid in Full
We also look at priority debts, which are treated differently under the Bankruptcy Code. In most Chapter 13 cases, these obligations generally must be paid in full through your court-approved repayment plan.
Priority debts commonly include past-due child support, alimony, recent federal or state tax obligations, Chapter 13 trustee fees and approved bankruptcy attorney fees. These obligations are treated differently from general unsecured debts because federal law gives them a higher payment priority. Paying these debts through your repayment plan can also help you resolve obligations that may otherwise continue to grow through collection efforts.
What About Student Loans?
Student loans are included when you file Chapter 13, but that does not usually mean they go away. In most cases, they are not discharged when your bankruptcy ends. Depending on your repayment plan, how these loans are handled during your case may change. However, unless you can prove undue hardship under federal bankruptcy law, you will generally still be responsible for any remaining student loan balance after completing your Chapter 13 plan.
Conclusion
Understanding what debts are included in Chapter 13 starts with knowing that every debt must be disclosed, even though each one is treated differently under the Bankruptcy Code. At The Socal Bankruptcy Law Firm, we will review your debts, explain how they may be handled and help you choose the best path forward. Attorney Aniko Felsen is here to guide you through every step of the process.
