If I File for Chapter 13 Bankruptcy, Do I Have to Repay Credit Card Debt?

A common misunderstanding of chapter 13 bankruptcy is the way the repayment plan works and what it’s actually used for.

First of all, the debts you have are not what matters with regard to your repayment plan. Instead, it depends solely on your disposable monthly income. This is the income left over after deducting all allowable monthly expenses from you monthly net income.

Let me illustrate with an example. Fred makes $3,700 per month, and contributes $200 per month to a 401k. After $600 in taxes, his net income is $2,900. After taking out monthly expenses, such as utilities, rent/mortgage, food, clothing expenses, travel/commute costs, etc, he’s got only $350 remaining.

This means his chapter 13 repayment plan is can only include $350 per month. From that, the trustee will fist repay secured creditors, then priority unsecured creditors, then non-priority unsecured creditors. Credit card debt is in that last group, and if the disposable monthly income is not enough to cover the first two groups, then the third group will be discharge, or “erased”.

So the answer to your question is, if your disposable income is enough to pay back any of your credit card debt, then some might be repaid, otherwise it will all just be discharged.

If you are filing for chapter 13, then you will need to talk to a bankruptcy lawyer. Chapter 13 cases are far more complex than chapter 7 cases, and you will need an experienced attorney to help you minimize your monthly payment by creating a legal and financial strategy before you even begin the bankruptcy process.