Some people refer to Chapter 13 bankruptcy as the wage earner’s plan. This is because when you file this type of bankruptcy, you create a repayment plan under which you will repay your creditors depending on your financial ability over a period of three to five years. When creating your repayment plan, you will have to identify your creditors as one of three types: priority, secured and unsecured.
According to the U.S. Courts, the type of claim a creditor has will affect how much you pay that creditor for your debt under your repayment plan. You may not pay all creditors completely for all debts. In fact, there may be some debts you do not repay if your finances will not allow.
A priority claim is one that you will have to repay in full under your plan. These are the first creditors that get their money from your plan payment each time you make it to the trustee. Priority debts include the costs of filing your bankruptcy and taxes, among others dictated by the bankruptcy code.
Secured claims are those for debts you secured with an asset at the time you obtained the debt. An example would be your home or vehicle. Generally, you will have to repay these debts in full as well if you wish to keep the collateral you used to secure the debt.
Unsecured claims include credit cards. These are the last items you will pay if your finances allow. In some cases, you may have no money left in your budget to repay these creditors, so they will not receive any payment. However, the court will still discharge the debts when it discharges your bankruptcy.