Chapter 13 Payment Plan Example (Breakdown)

Trying to wrap your head around a Chapter 13 bankruptcy plan? You’re not alone. It’s one of those things that sounds way more complicated than it actually is.

At its core, it’s just a structured way to pay back some (or all) of your debt over time based on what you can actually afford.

In this post, we’ll do a super simple Chapter 13 payment plan example. You’ll see how the payments are figured out, what debts get priority, and what happens if you can’t pay everything back.

Chapter 13 Plan Example Scenario

Let’s imagine someone named Sarah. She’s got a steady job, a small house, and a car she needs to get to work. Life threw some curveballs her way like unexpected medical bills, credit card debt, and she fell behind on her mortgage for a bit.

It’s nothing too extreme, but enough to feel stuck.

Here’s a quick snapshot of her situation:

• She earns $4,500 a month
• Her necessary monthly expenses (rent, food, utilities, gas, etc.) are about $3,200
• She owes $20,000 in credit card and medical bills (unsecured debt)
• She’s behind $5,000 on her mortgage
• She still owes $10,000 on her car loan
• Attorney and trustee fees add up to about $3,000

So how do we turn all that into a manageable payment plan? Let’s look at her Chapter 13 plan example so you can get an idea.

Also Read: Practical Chapter 13 Tips And Tricks

How The Monthly Payment Is Calculated

First, the court wants to know how much Sarah can reasonably afford to pay each month. This is called her disposable income, which is basically what’s left after the bills are paid.

Sarah’s disposable income looks like this:

• $4,500 (income) – $3,200 (necessary expenses) = $1,300

So, she’s got $1,300 each month that could go toward her plan.

There are some debts that must be paid through the plan. Certain debts like her missed mortgage payments, her car loan, and any court or attorney fees have to be paid in full.

Here’s what she’s working with:

• $5,000 for mortgage arrears
• $10,000 for the car loan
• $3,000 for trustee/attorney fees

That’s $18,000 total in must-pay debts.

Her plan will last 60 months (5 years), which is common in Chapter 13.

Also Read: Can Chapter 13 Take A Settlement Check?

Multiply $1,300 x 60 months, and that gives her $78,000 total to work with.

After she pays the $18,000 in required debts, she’s still got $60,000 left in her plan that can go toward the rest.

What Happens To The Rest Of Your Debt?

Once the required stuff is paid, whatever’s left over in your monthly plan can be applied to unsecured debts like credit cards, medical bills, personal loans, and old utility bills.

In Sarah’s case, she owes $20,000 in unsecured debt. And she’s got $60,000 of space left in her plan after the secured debts are covered.

So yes, she can afford to pay the whole thing off.

But here’s the important part: if she couldn’t afford to pay all of it back, that’s okay too.

Chapter 13 doesn’t demand full repayment of unsecured debt unless you have the income and assets to do it.

Let’s say her disposable income had been just $300/month instead of $1,300. That would’ve added up to $18,000 over 60 months. After paying off the mortgage, car, and fees, there might not have been anything left for those credit cards. And that’s fine.

Also Read: What Happens to Student Loans in Chapter 13?

At the end of the plan, any remaining unsecured debt can be discharged, which is a fancy way of saying wiped out. Clean slate.

What If You Can’t Pay It All Back?

This is a big worry for people, and totally understandable.

But Chapter 13 isn’t about punishing you for not being able to pay every cent. It’s about creating a realistic, structured way to handle your debt based on your actual situation.

The court knows not everyone can pay everything back. That’s why unsecured creditors often only get a fraction of what they’re owed. Sometimes it’s 100%, sometimes it’s 10%, and sometimes it’s literally nothing.

It depends on what you can afford and what you own.

Here are a few things that can affect how much unsecured debt you need to pay back:

• How much disposable income you have each month
• The total value of your non-exempt assets (stuff you’d have to give up in Chapter 7)
• The length of your plan (usually 3 or 5 years)

If you can only afford small payments, your plan will reflect that.

As long as you stick to the terms and complete the plan, any remaining qualifying debt at the end goes away. No collectors. No lawsuits.

Bottom Line

Your Chapter 13 payment plan is built around what you can reasonably afford and not some impossible number. Debts like your mortgage and car loan are handled first, then whatever’s left gets divided up for the rest.

If you can’t pay it all, that’s okay. The whole point of Chapter 13 is to give you space to breathe and time to catch up, without the nonstop pressure of creditors breathing down your neck.

And once your plan is done, you walk away with a lot less debt and a lot more peace of mind.

If you’re thinking about filing, or just trying to get a clearer picture of what this might look like for you, it helps to map out your own numbers.

You don’t have to figure it all out on your own. But now that you’ve seen a real-life example, it probably feels a little less overwhelming. And that’s a pretty good start.