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In A Chapter 13, Are All Debts Paid In The Plan?

A Chapter 13 bankruptcy is one where the debtor proposes a plan of repayment of their debts. If the Court approves the plan, the debtor makes a monthly payment to the Chapter 13 Trustee, and the Trustee sends payments to the lenders. The debtor does not have to keep track of whether a certain creditor was paid that month or not, the debtor just has to pay the Trustee the amount needed to cover all of the debts included in the Plan. But there is the possibility that not all debts will be paid by the Trustee. The best example of a type of debt the Trustee may not pay is your home mortgage. Many debtors want to continue to pay this debt on their own, outside of their plan payment, so the mortgage company will continue to escrow taxes and insurance and there is no question about whether you have paid enough to cover those expenses (which tend to change from year to year).

While it can be nice to pay some things outside of the plan, it is much easier to just make one payment per month to the Trustee and let the Trustee’s office handle disbursement. And, make no mistake; you will still have plenty of things that require you to pay outside of your plan payment, such as:

● Auto insurance
● Cell phone expenses
● Utilities
● Homeowner’s association dues
● Gym memberships

And of course all of your daily living expenses are still your responsibility, outside of your Chapter 13 Plan. You will still need to pay for any cable television services, make sure you have enough room in your budget for gas and groceries, and funds available to pay for emergencies that might arise. The beauty of bankruptcy is that you are reducing the amount of your debt, and thus the amount of monthly expenses. This is true even in a Chapter 13 where you are paying back part of your unsecured debt. When you have less debt, you have money at your disposal to pay for everyday necessities, so the fact you have to do this outside of a Chapter 13 plan is not a big deal. If you have concerns that you are not able to provide for basics and still make your Chapter 13 plan payment, ask your attorney what can be done to alleviate some of the financial pressure you are feeling. It might be possible to modify your plan, so the plan payment is more manageable. Or, there may be another solution that is just right for your bankruptcy case. Call today to find out more.

For more information about bankruptcy, contact us at We will explain how the process works and make sure you are comfortable before proceeding.

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