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Do you have to pay all credit card debt with Chapter 13?

If you're thinking of filing for Chapter 13 bankruptcy, you may have a high amount of credit card debt. Perhaps you lost your job and you were forced to put everything on the cards just to get by. Now you have a new job and a regular income, which is why you're interested in using the repayment plan, rather than liquidation. The credit card debt is too much to pay all at once, but do you have to pay all of it eventually under the new plan?

You may not. There are three main types of debt considered with Chapter 13 bankruptcy: Priority debt, secured debt and unsecured debt. The first two have to be paid completely, but the last does not in every case. You may just have to pay a portion of it.

For debt to be "secured," it means there's some type of collateral connected to it -- a car loan, for example. For the debt to be consider a priority, it has to be something like back taxes owed to the Internal Revenue Service or child support that you still owe your ex.

Unsecured debt is a loan not backed by any collateral, like a credit card. You'll still need to pay some, but it just has to be the same amount as the total value of the nonexempt property that you own. So, if your debt is larger than the value of the nonexempt property, you could end up paying back less than you owe, though you'll have to pay something toward it.

It's very important to know what you're obligated to pay when filing for Chapter 13 bankruptcy. Don't assume anything and be sure you really know what the agreement creates in terms of future financial obligations.

Source: FIndLaw, "Chapter 13 Bankruptcy Rules FAQ," accessed Feb. 03, 2017

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