Today I want to answer the question, what is a zero distribution plan in Chapter 13. The answer to that question is that Chapter 13 offers you opportunities to do certain, very specific things. For example, you can discharge parking violations or other toll violations or speeding tickets in Chapter 13 where you can’t do that in Chapter 7.

Sometimes you can restructure an automobile loan if you’ve had the car for more than 910 days and the car is worth much less than what you owe. Sometimes you can cure arrears on a home mortgage so that you can catch up those arrears over 60 months and keep your home; and other types of things that are only available in Chapter 13.

When that happens, you can file a plan that will payout your net disposable income over 5 years or 3 years, as the case may be, and it’s possible that your net disposable income is really zero dollars or close to zero dollars. And then your payment will only be for fees of the trustee and probably fees for your bankruptcy lawyer as well. If what you’re trying to do is cure the arrears on a home mortgage, then your Chapter 13 payment may only be the amount required to cure the arrears on that home mortgage. And then there won’t be anything extra that other general unsecured creditors will receive in the bankruptcy.

When unsecured creditors aren’t going to receive anything in a bankruptcy under Chapter 13 that’s called a zero distribution plan. Now, some states and some districts and some jurisdictions they strongly disfavor those and may require you to make a payment to general unsecured creditors in Chapter 13. So you are in most states and jurisdictions authorized to have a zero distribution plan in Chapter 13.