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Unsecured Debt in Chapter 13 Bankruptcy

While Chapter 13 bankruptcy protection is known for helping Americans hang onto their homes and cars, people often wonder how unsecured debt works in Chapter 13 bankruptcy.

To speak with a lawyer right away about how unsecured debt works in a Chapter 13 bankruptcy filing, please fill out this form. You can arrange a free, no-obligation consultation with an attorney near you.

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Unsecured Debt in Reorganization

Unsecured debts are those that are not connected to any kind of property, and include credit card debt, medical debt and student loans. A Chapter 13 filer's unsecured debts, like her secured debts, are listed and organized as part of the repayment plan.

Section 507 of the U.S. Bankruptcy Code outlines which unsecured debts take repayment priority in bankruptcy filings. These include:

  • Administrative expenses and any fees and charges assessed to the bankruptcy filer's estate (such as those incurred during the bankruptcy process itself);
  • Unsecured claims outlined in section 502 (f) of the Bankruptcy Code (these involve business concerns and are legally dense; consult your lawyer for a complete explanation);
  • Wages, commissions, salaries, retirement payments or benefits earned by an employee of the bankruptcy filer;
  • Debts owed to tenants or clients for whom the filer has not yet performed the agreed-upon service;
  • Alimony or child support payments; and
  • Certain tax debts.

If you have any of these types of unsecured debts and decide to file for Chapter 13 bankruptcy, you should expect to repay some or all of them (most of these categories have dollar limits on how much a person is expected to repay).

Debt Limits & Non-Priority Unsecured Debts in Chapter 13 Bankruptcy

There is a limit to how much unsecured debt you can have (up to $360,475) in order to be eligible for Chapter 13 bankruptcy. And, while certain unsecured debts are expected to be repaid in Chapter 13 bankruptcy, others are considered less important ("non-priority debts").

These include:

  • Credit card debt: Money you owe on your credit card (not including debts incurred immediately before a bankruptcy filing, especially if those were for the purchase of luxury items);
  • Debt from medical bills: Money you owe for medical procedures, treatments or examinations does not take priority in Chapter 13 cases and may be discharged by the court, depending on how much other debt you have; and
  • Payday loan debt: Like credit card debt, as long as payday loans were taken out long enough before you filed your Chapter 13 case, they should be considered low priority by the court.

Ask a Bankruptcy Lawyer about Your Unsecured Debts Today

If you're ready to find out whether Chapter 13 bankruptcy might help you work through your secured and unsecured debts, take advantage of this opportunity to speak with a bankruptcy lawyer today.

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Laws may have changed since our last update.  This is for informational purposes and is not legal advice.  Speak to a local bankruptcy attorney for legal advice about your particular situation.