Chapter 13 bankruptcy involves creating a repayment plan you will use to repay your creditors. This is different from filing Chapter 7 bankruptcy in New York where you liquidate your assets to pay back your debts and the court then dismisses any remaining debt. The court may still dismiss some debts in a Chapter 13, but you must first complete your repayment plan.

The U.S. Courts explains that to begin your repayment plan, you need to figure out your disposable income. This is your income after deducting your expenses, such as rent or mortgage, food and utilities. You must have enough disposable income for the court to allow you to file Chapter 13. If you do not have any, you will have to file Chapter 7.

Once you figure your disposable income, you will begin listing your debts and the amount of money that will go to each debt. You must start with priority debts that are debts you must pay in full. These include things like taxes that bankruptcy law says you must pay in full. If you have money left after paying these debts, you will pay any secured debt. This is a debt for which you put up collateral, such as a car loan. You do not have to repay these debts in full, but you must pay the creditor the full value of the collateral. If you have any money left over, you may then pay unsecured debts, such as credit cards.

You will pay the full amount of your plan payment to the trustee and the trustee will then pay each creditor. This information is for education and is not legal advice.