I need to file a Chapter 13 case. Does that mean that I have to pay all of my unsecured creditors in full?

Well, the short answer to that question is no. That’s not how Chapter 13 works. In Chapter 13, you have to satisfy two tests in order to confirm your proposed repayment plan. The first test is you have to pay creditors at least as much as they would get in a Chapter 7 case if you were liquidated. The second test is you’ve got to pay over all of your net disposable income over the life of your plan in order to discharge your debt. So, the focus is not really on how much debt you owe, the focus is on what your income is, what your legitimate deductible expenses are, and how much creditors would get if you were to have your property liquidated in a Chapter 7 case. In fact, sometimes, under the right circumstances, a Chapter 13 plan can provide no payment to unsecured creditors and still be approved by the bankruptcy court, and then at the end of the plan term, you can still get a discharge of all of your dischargeable, unsecured debts.


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