When you’re facing overwhelming debt, the prospect of filing for bankruptcy can seem like a daunting decision. However, understanding how Chapter 13 bankruptcy works—and how much debt you’ll actually have to repay—can provide some clarity and relief. As an attorney with years of experience guiding clients through Chapter 13 bankruptcy, I’m here to break down how much debt most people typically end up having to repay after filing.
The Basics of Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often referred to as a “wage earner’s plan.” It allows individuals with a regular income to develop a plan to repay all or part of their debts over a specified period. Unlike Chapter 7 bankruptcy, which involves liquidating assets to repay creditors, Chapter 13 enables you to keep your property while making payments over a 3 to 5-year period. For that reason alone, it is in the best interests of most people to take this route.
The repayment plan is custom, considering your income, expenses, and total debt. The most significant advantage of Chapter 13 is that it provides a pathway to gradually pay off your debt without the immediate threat of foreclosure or repossession.
How Much Debt Will I Have to Repay?
The amount of money you will have to pay of your original debt depends on several factors, including the type of debt you owe, your income, and your disposable income after necessary expenses.
Generally speaking, under Chapter 13 bankruptcy, you may end up paying around 10% of your total unsecured debt. For example, if you owe $100,000, you might need to repay around $10,000 during your repayment plan. However, this percentage can vary based on the specifics of your case and other factors like the number of creditors owed.
This repayment occurs in installments over 3 to 5 years, making it more manageable for most people. The court will determine your repayment amount, considering your income and expenses to ensure the plan is fair and feasible.
Secured vs. Unsecured Debts
Chapter 13 treats secured and unsecured debts differently. Secured debts, such as mortgages or car loans, are linked to specific property that can be repossessed if payments are missed. You must usually pay these debts in full through the Chapter 13 plan to keep the property.
Unsecured debts, like credit card bills, medical bills, and personal loans do not associate to a specific property. These are the types of debts that are often subject to partial repayment—like the 10% mentioned earlier.
Costs Involved in Filing for Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy involves some upfront costs, but it’s essential to understand them as part of the process:
- Filing Fee: To initiate the Chapter 13 process, you’ll need to pay a $310 filing fee when you submit your petition to the court. This one-time cost covers the administrative expenses of processing your case.
- Attorney Fees: While attorney fees for Chapter 13 cases can vary depending on the complexity of your situation, at Warren & Migliaccio, L.L.P., we strive to offer some of the most reasonable rates in Texas. Our goal is to provide expert legal guidance at a cost that doesn’t add to your financial burden. During your free consultation, we can discuss the specifics of your case and give you a clear understanding of what your legal fees will be.
The Chapter 13 Process: What to Expect
Once you file for Chapter 13 bankruptcy, the court will appoint a trustee who will oversee your case. You’ll propose a repayment plan based on your income and the amount of debt you owe. The plan must be approved by the court, which will evaluate whether it meets the requirements of the bankruptcy code and whether it is realistic given your financial situation.
Throughout the repayment period, you’ll make regular payments to the trustee, who will then distribute the funds to your creditors according to the terms of your plan. If you successfully complete your repayment plan, any remaining eligible unsecured debt may be discharged, meaning you are no longer legally required to pay it.
Call A Bankruptcy Attorney For Help
If you’re considering filing for Chapter 13 bankruptcy, it’s crucial to have an experienced attorney by your side. At Warren & Migliaccio, L.L.P., we’ve helped thousands of clients navigate the complexities of bankruptcy and regain control of their financial lives.
For a free consultation to discuss your options and find out how we can help you, call us at (888) 584-9614 or fill out our online contact form. We’ll work with you to develop a repayment plan that fits your situation and helps you move toward a debt-free future.
