Manhattan Chapter 13 Bankruptcy Attorney

The main component of a Chapter 13 case is the repayment plan, which you’ll propose to the court and creditors. Your creditors may object to your plan, but if you make satisfactory changes, the court will likely approve your plan at the final confirmation hearing. Whereas Chapter 7 involves liquidation of assets, Chapter 13 instead involves a repayment plan that lasts three to five years and won’t require you to immediately sell property to pay back creditors. Most plans end up having you pay less than the amount owed.

At the confirmation hearing, the judge will confirm your repayment plan if it meets the following criteria:

• the plan is feasible (e.g., you have enough income to pay the creditors as provided);
• you proposed the plan in good faith; and
• the plan complies with bankruptcy law.

You must complete your three-to-five-year repayment plan before any debt can be discharged (as opposed to Chapter 11, when debt is immediately discharged). 

Some examples of debts that you can repay through Chapter 13 are:

• Priority debt/claims (e.g., child support, alimony arrearages, most tax obligations)
• Secured debt (e.g., mortgages, auto loans)
• Unsecured debt (e.g., credit card balances, medical bills), though this does not necessarily need to be fully repaid
• Value of any property not protected by the plan

The length of your repayment plan largely depends on how much you earn, though most filers elect for five years because monthly payments are often significantly lower in such a case. This also increases the likelihood that the court will approve your plan, as it may appear more feasible for you to pay off. One reason that a person may have a three-year plan, though, is if they qualify for Chapter 7 but turn to Chapter 13 instead to save a house or car or pay off a priority debt. 

If you experience a change in financial circumstances that inhibits your ability to make payments, such as if your income unexpectedly decreases, you may be able to modify the amount being paid to unsecured creditors. For required debts, the court may allow you to discharge your debts on the grounds of hardship (e.g., a debilitating illness that prevents you from working). 

After completing your repayment plan, the remaining balance on your qualifying dischargeable debts will be erased, and you should be free of debt (except for mortgages or student loans).