Chapter 13 Repayment Plan
See a practical example of how a Chapter 13 repayment plan works to improve your monthly budget with these Chapter 13 payment plan examples.
Schedule a ConsultationUnderstanding exactly how debt can be restructured under a Chapter 13 repayment plan can be confusing. How do you determine which option is going to provide the best long term outlook and the quickest debt relief? Ultimately it is best to consult with an attorney to see your options under bankruptcy law.
Many people want to get a realistic understanding of how the Chapter 13 bankruptcy works. Since it is a customized debt management program based on your personal debt and income, a bankruptcy attorney needs to run a specific budget scenario for you. But to give you a general understanding, here are some examples of how the plan will work for you.
Chapter 13 Repayment Plan Example: Credit Card Reduction
Example: Household family of 4 with mounting credit card debt and medical bills due to a temporary income interruption during a medical leave. Both spouses are back to work, but debt has become overwhelming.
Chapter 13 Budget Example
- Example: Household family of 4, Mounting credit card debt and medical bills due to a temporary income interruption during a medical leave. Both spouses are back to work, but debt has become overwhelming.
| Monthly Income (after taxes): | $4,350.00 | |
| Current Total Debt Load | Balance Owed: | Terms: |
| First Mortgage | $160,000.00 | 6% interest over 30 years |
| Vehicle loan 1 | $15,000 | 6.5% over 5 years |
| Vehicle loan 2 | $19,000.00 | 7.5% over 5 years |
| Credit card & medical bills | $90,000 | average rate: 12% |
| TOTAL DEBT: | $284,000.00 | |
| Current Monthly Budget | Chapter 13 Budget – 36 month plan | |
| First Mortgage | $1,125.00 | $1,125.00 |
| Vehicle 1 Payment | $293.00 | $293.00 |
| Vehicle 2 Payment | $381.00 | $271.00 |
| Gas & Maintenance | $650.00 | $650.00 |
| Groceries | $675.00 | $675.00 |
| Household goods & supplies | $125.00 | $125.00 |
| Utilities | $250.00 | $250.00 |
| Medical & dental expenses | $50.00 | $50.00 |
| Insurance (Auto & Medical) | $300.00 | $300.00 |
| Clothing and other living expenses | $350.00 | $350.00 |
| Misc. | $100.00 | $100.00 |
| Minimum payment on credit card/medical debt | $1,800.00 | $0 |
| MONTHLY EXPENDITURES | $6,099.00 | $ 4,189.00 |
| Income | $4,350.00 | $ 4,350.00 |
| Difference | $(1,749.00) Gaining further debt |
$161.00 Monthly Ch. 13 Plan Pymt |
| Debt Load after 60 Month Plan | Current | Chapter 13 |
| First Mortgage | $159,000.00 | $159,000.00 |
| Vehicle loan 1 | $0 | $0 |
| Vehicle loan 2 | $0 | $0 |
| Credit card & medical bills | $90,000.00 | $0 |
| Additional debt accrued by unbalanced budget |
$62,964.00 | $0 |
| TOTAL DEBT AFTER 36 MONTHS: | $311,964.00 | $159,000.00 |
| Savings vs. trying to pay bills on its own |
$152,964.00 | |
| Reduction in debt load vs. prior to filing |
$125,000.00 |
Benefits from Plan
- Debt free (except for mortgage) after only 36 months!
- Credit improved by 36 month track record of timely payments and reduced debt-to-income ratio;
- Reduced debt by $125,000 over the course of the program;
- Legally eliminated over 96% of unsecured debt at the completion of the program;
- Court protection from creditors during the repayment plan. This means no calls, no law suits, etc.
- All unsecured debts are paid back at 0% interest with no additional penalties;
- Without the restructuring opportunity of a Chapter 13 for a 3 year time period, this family would have accrued an ADDITIONAL $62,964.00 worth of debt due to an unbalanced budget (high credit card minimum payments). Instead, the family was able to eliminate debt…the difference between doing nothing and completing the Chapter 13 is a whopping $152,964.00 savings!
Chapter 13 Repayment Plan Example: Mortgage Debt Reduction
Example: Household family of 3 that got behind on their mortgage while trying to negotiate a loan modification with their mortgage company. Due to the drop in the value of their home, their monthly payment will be more than the house is worth.
| Monthly Income (after taxes): | $5,100.00 | |
| Current Total Debt Load | Balance Owed: | Terms: |
| First Mortgage | $176,000.00 | 6% interest over 30 years |
| Second Mortgage | $44,000.00 | 9% interest over 20 years |
| Vehicle loan 1 | $15,000.00 | 6.5% over 5 years |
| Vehicle loan 2 | $19,000.00 | 7.5% over 5 years |
| Credit card & medical bills | $23,000.00 | average rate: 12% |
| TOTAL DEBT: | $277,000.00 | |
| Current Monthly Budget | Chapter 13 Budget – 60 month plan | |
| First Mortgage | $1,263.00 | $1,263.00 |
| Payment to catch up 1st Mortgage | $ 100.00 | |
| Second Mortgage | $395.00 | $0 |
| Vehicle 1 Payment | $293.00 | $293.00 |
| Vehicle 2 Payment | $381.00 | $271.00 |
| Gas & Maintenance | $650.00 | $650.00 |
| Groceries | $650.00 | $650.00 |
| Household goods & supplies | $125.00 | $125.00 |
| Utilities | $250.00 | $250.00 |
| Medical & dental expenses | $50.00 | $50.00 |
| Insurance (Auto & Medical) | $300.00 | $300.00 |
| Clothing and other living expenses | $400.00 | $400.00 |
| Misc. | $100.00 | $100.00 |
| Minimum payment on credit card/medicaldebt | $350.00 | $0 |
| MONTHLY EXPENDITURES: | $5,207.00 | $ 4,452.00 |
| Income | $5,100.00 | $ 5,100.00 |
| Difference | $(107.00) Gaining further debt |
$648.00 Chapter 13 Plan Payment |
| Debt Load after 60 Month Plan | Current | Chapter 13 |
| First Mortgage | $169,358.00 | $163,775.00 |
| Second Mortgage | $39,031.00 | $0 |
| Vehicle loan 1 | $0 | $0 |
| Vehicle loan 2 | $0 | $0 |
| Credit card & medical bills | $23,000.00 | $0 |
| Additional debt accrued by unbalancedbudget | $6,420.00 | $0 |
| TOTAL DEBT AFTER 60 MONTHS | $237,809.00 | $163,775.00 |
| Savings vs. trying to pay bills on your own, pursuant to agreements | $74,034.00 | |
| Reduction in debt load vs. prior to filing | $113,325.00 |
Benefits of a Chapter 13 Repayment Plan:
- Now have $648.00 available in monthly budget to save or use for other purchases;
- Credit improved with established 36 – 60 month track record of timely payments and reduced debt-to-income ratio;
- Reduced debt by over $113,000 over the course of the program;
- Legally eliminate over 50% of unsecured debt at the completion of the program;
- Court protection from your creditors while you are in repayment plan. This means no calls, no law suits, etc.
Let Us Help Create Your Custom Chapter 13 Bankruptcy Payment Plan
This hypothetical scenario is presented to describe a few of the potential benefits of filing a Chapter 13. Acclaim Legal Services offers free consultations to help you better understand what the specific benefits would be for your personal finances.
Schedule an appointment with one our licensed and experienced attorneys to discuss how to get your finances on the right track or call us today at 866-261-8282.
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