Credit card debt is one of the most common sources of debt brought into a bankruptcy filing. While most people who end up in Chapter 13 have an income sufficient for repayment of credit card debt, there are cases in which a debtor never pays unsecured creditors at all in Chapter 13.
The overall goal of Chapter 13 bankruptcy is to repay debts over time without having to worry about asset liquidation, interest fees or penalties. Although many Chapter 13 cases do include a substantial portion of debts listed as unsecured, the priority debts that get payment are those that are tied to an asset such as a house or car. This isn’t to say that unsecured debts such as credit cards or medical bills never get included in a Chapter 13 repayment plan, just that their priority level is much lower than a secured debt.
The amount repaid through a Chapter 13 repayment plan is based on two thing. First, the amount of disposable income the debtor holds. Disposable income refers to the amount of income left over after essential living expenses, such as food or shelter, are paid. Although a debtor was not eligible for Chapter 7 due to their income level being higher than the median income of the state, there is no guarantee that their disposable income is sufficient enough to repay low priority creditors. The repayment plan amount is also based on asset values and liquidation potential. While the overall value of assets does determine how much a debtor may pay in Chapter 13, their liquidation potential is not relevant as long a payments are being made.
The bottom line is that whether credit cards are repaid through Chapter 13 or not is up to the financial specifics held by the debtor. There is no guarantee that payments will have to be made through the Chapter 13 plan, just like there is no guarantee that a debtor will get out from under these debts without having to repay at least a portion of the unsecured debts. Anyone considering filing for bankruptcy should consult a bankruptcy lawyer to review their case.