Dealing with debt can be stressful — especially if you aren’t sure how you’ll repay it. If you earn a regular income, have the ability to repay at least some of your debt, and want to keep the assets you have, declaring Chapter 13 bankruptcy may be an option for you. This form of bankruptcy doesn’t simply discharge your debt. Instead, it requires you to create and stick to a repayment plan. What is a Chapter 13 repayment plan? How do you make sure you create the right one for you? Here’s what you need to know.
Chapter 13 bankruptcy won’t make your debts disappear. However, it can stop foreclosure proceedings on your home and provide you with a clear pathway to financial wellness.
What Is a Chapter 13 Repayment Plan?
When an individual declares bankruptcy, they have two main options:
- Chapter 7 Bankruptcy: Discharges debt but may require unexempt assets to be sold
- Chapter 13 Bankruptcy: Involves repaying debt but allows you to keep your assets.
Most people who declare Chapter 7 bankruptcy have low income and very few unexempt assets. Chapter 13 bankruptcy (sometimes called a “wage earner’s plan”) is often the better choice if your income is too high for Chapter 7 bankruptcy or if you have unexempt assets you want to keep.
When you declare Chapter 13 bankruptcy, you and your attorney propose a repayment plan to the court. The repayment plan involves paying your creditors installments over the next 3 to 5 years. If the court approves your plan, you must pay it as agreed.
Even though Chapter 13 bankruptcy involves repayment of debts, you may end up paying less than the debt owed. In many cases, the remainder of any eligible debt will be discharged once your repayment plan is complete.
Eligibility for Chapter 13 Repayment Plans in Florida
In Florida, there is no maximum income limit to file for Chapter 13 bankruptcy. However, before approving your repayment plan, the court must verify that you make enough to repay your debts over the proposed plan period. To make this determination, the court must review the following:
- Proof of income and details about the amount and frequency
- A list of all property you own
- A list of your living expenses
- A list of all your debts and creditors.
If the court determines that you can reasonably repay your debts, it will decide whether your repayment term will be three or five years. The court makes this decision based on how much you make relative to the Florida median income. If you make less than the median, your term will be three years; if you make more than the median, your term will be five years.
Over a three-year term, you will pay less than you would in a five-year term. Once I have determined the appropriate repayment term, I can help you create a repayment plan that won’t result in your paying more than you have to.
It’s worth noting that the laws surrounding bankruptcy are very complex, and it’s extremely difficult to successfully declare bankruptcy without legal representation. I can review your situation and tell you whether you’re qualified to declare Chapter 13 bankruptcy. If you aren’t, I can help you understand your other available options.
Not sure if you’re eligible for Chapter 13 bankruptcy? Call me at (407) 749-0080 to schedule a consultation.
Factors Affecting Your Chapter 13 Repayment Plan
A Complex Calculation
The calculation to determine how much you must repay is a complex one. There are many different factors that go into this decision. These are some of them:
Amount of Non-Exempt Property
“Exempt” property is property needed for daily life. These are some of the most common examples of exempt property:
- Equity in your primary residence
- Equity in your car (up to $5,000)
- Most public assistance
- Retirement savings
- Education savings.
The more non-exempt property you have, the more you’re likely to have to pay back to creditors.
Income and Expenses
The more income you have relative to your expenses, the more the court will assume you can pay toward your repayment plan.
Any Priority Debts You Have
In Chapter 13 bankruptcy, some debts may be discharged after your repayment term. However, “priority debts” must be paid in full. Priority debts include the following:
- Child support
- Alimony
- Criminal fines
- Most unpaid federal income tax
If you work with me, I can identify whether you have any priority debts and help you make sure you pay them.
Creating Your Chapter 13 Repayment Plan
While the court will review and approve (or deny) your repayment plan, it’s up to us to create it. This is where having an experienced bankruptcy attorney is essential. I will carefully evaluate your situation and draw up a repayment plan that’s workable for you while still meeting court requirements. Often, your monthly Chapter 13 payment is less than what you would pay every month if you were still paying creditors individually.
Modifying Your Chapter 13 Plan
Over the course of your repayment plan, your circumstances may change. If you have trouble repaying because of an income reduction or other circumstances, you may be able to modify your plan. Once the repayment plan has been approved, modifying it can be complex. You must file a motion to do so, and you also must serve a copy of the motion to all creditors. If you need to change your repayment plan, I can file a motion for you and represent you at a hearing if necessary.
Ready to Create Your Chapter 13 Repayment Plan?
The Right Bankruptcy Attorney Makes All the Difference
Declaring bankruptcy can be an overwhelming prospect, but once you’re on the other side, you’ll realize how freeing it can be to have a plan for getting out of debt. I’ve dedicated my career to helping Floridians like you find their way out of debt, and I’m ready to help you, too.
Whether you’re ready to declare Chapter 13 bankruptcy or just want to explore your options first, give me a call at (407) 749-0080 to schedule your free consultation.
Attorney Lewis Roberts
The weight of debts that one cannot pay carries financial stress into every waking moment. It is time for this to end. Lewis Roberts, PA, offers solutions to relieve these worries. With over 20 years of experience in helping individuals overcome the burden of debt, bankruptcy attorney Lewis Roberts presents a range of options tailored to each unique situation. Clients can trust his advice on any matter related to debts, as he identifies appropriate options and explains the paths to debt relief clearly and carefully. This ensures that clients make the best decisions for their future. [ Attorney Bio ]
