📌 Key Takeaways Table

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What Is Chapter 13 Bankruptcy?

If you’re drowning in debt but want to keep your home, car, or other important assets, Chapter 13 bankruptcy might be the right path. Known as a “reorganization” bankruptcy, Chapter 13 lets you catch up on missed payments while protecting your property. Instead of wiping out debt immediately like Chapter 7, Chapter 13 creates a court-approved repayment plan that typically lasts three to five years.

Unlike other states, North Carolina bankruptcy cases fall under the Middle, Eastern, and Western District Courts, and some rules or local procedures can vary depending on where you file. However, the basics of Chapter 13 stay the same: you pay back what you can afford over time — not necessarily what you owe in full.

Whether you’re behind on mortgage payments, car loans, or even taxes, this type of bankruptcy gives you breathing room and a plan to get caught up without losing everything.

For a full breakdown of how Chapter 13 works, visit our complete guide to Chapter 13 bankruptcy.

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How Much of Your Debt Must Be Paid Back?

One of the most common questions people ask when considering Chapter 13 bankruptcy is: “Do I have to pay back everything I owe?” The short answer is no — but the long answer depends on what kind of debt you have.

Types of Debt in Chapter 13

In bankruptcy, debts are split into three major categories:

1. Secured Debts

These are debts tied to property, like:

• Mortgages

• Car loans

• Furniture or appliance loans

To keep the property tied to these debts, you must stay current on regular payments and catch up on any missed payments (also called arrears) through your repayment plan. If you’re behind on your mortgage or car, your Chapter 13 plan helps you get caught up.

Learn more about how this works in our guide on secured vs. unsecured debt in bankruptcy.

2. Unsecured Debts

These include:

• Credit card balances

• Medical bills

• Personal loans without collateral

Unsecured debts do not have to be paid in full. Instead, the court will look at your income and assets to decide how much, if any, you need to repay. Many people pay just a small percentage of these debts — and some even pay nothing at all — over the life of the plan.

3. Priority Debts

These are debts that must be paid in full in a Chapter 13:

• Certain income taxes

• Past-due child support or alimony

• Court fees or fines

These debts get paid before unsecured creditors. Skipping these payments in your plan can cause your case to be dismissed.

To better understand the difference between priority and nonpriority debts, visit our post on priority vs. nonpriority debt in bankruptcy.

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Debts That Must Be Paid in Full

Here’s a summary table to clarify what must be paid versus what might be forgiven:

When you file Chapter 13, the bankruptcy court will look at your total financial picture — income, expenses, debts, and assets — to figure out your fair share of repayment.

Want a closer look at which debts may be discharged in Chapter 13? Visit our post on debts discharged in Chapter 13 bankruptcy.

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How Is Your Chapter 13 Repayment Plan Calculated?

The idea behind Chapter 13 is not to pay off everything you owe — it’s to pay back what you can afford. This means your plan is built around something called disposable income. But what exactly does that mean?

Understanding Disposable Income

Disposable income is the money you have left after paying for your essential living expenses — like rent, utilities, food, transportation, and medical costs. Once those costs are covered, the remaining amount is what you’ll use to repay your creditors through the Chapter 13 plan.

Some factors that affect how much disposable income you have include:

• Your total household income

• Your reasonable monthly expenses

• The size of your household

• Whether your income is expected to change in the near future

The court and your bankruptcy trustee will review this information closely to decide on a fair and workable payment.

To learn more about how this is calculated, visit our guide on how your Chapter 13 payment is calculated.

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What Happens If Your Financial Situation Changes?

Life isn’t predictable. You might lose your job, get promoted, go through a divorce, or experience a medical emergency. When something major affects your finances, your Chapter 13 plan may need to change too.

In North Carolina, if you lose income, you can:

• Request a temporary suspension of your payments

• Ask to modify your plan

• Possibly convert to Chapter 7 if your situation qualifies

On the other hand, if your income increases, the trustee may request higher payments to ensure creditors get a fair share.

These changes are not automatic — you’ll need court approval for any modifications. Read more about this in our article on what happens if your income changes during Chapter 13.

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What If You Can’t Keep Up?

If you fall behind on your payments, the court could dismiss your case — meaning you lose protection from creditors. However, you may have options before things reach that point:

• Ask the court to reduce your payment: Request to reduce Chapter 13 payments

• Catch up on missed payments with a temporary payment plan

• Convert your case to a Chapter 7 bankruptcy (if you qualify)

Ignoring the problem is the worst option. Always let your bankruptcy attorney know right away if your situation changes.

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Modifying Your Plan Midway Through

Chapter 13 can last as long as five years, and a lot can happen in that time. If your financial circumstances change, don’t panic — the system allows for adjustments.

When Can You Modify Your Plan?

You may qualify for a plan modification if:

• You lose or change jobs

• You experience a medical emergency

• You get divorced or separated

• You incur an unexpected expense

Your bankruptcy attorney can help file a motion with the court to propose new payment terms. The trustee and creditors will review the request, and if approved, your plan can be adjusted to better fit your life.

Want more insights? Visit our page on modifying Chapter 13 payments.

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What Happens at the End of Chapter 13?

After successfully completing your plan payments, you’ll reach the finish line — the discharge. This means any remaining unpaid non-priority unsecured debts (like credit cards and medical bills) are wiped out.

Here’s what typically happens at the end:

1. Your attorney files a certification of plan completion.

2. You complete a required financial management course.

3. The trustee performs a final review of your case.

4. The court issues a discharge order.

For a full walkthrough, check out our guide on what to expect at the end of Chapter 13.

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Final Thoughts: You’re Not Alone — You Have Options

The idea that you must pay back every dollar you owe in a Chapter 13 bankruptcy simply isn’t true. In North Carolina, how much you pay depends on your income, the type of debt you have, and your overall financial situation. Some debts must be paid in full — others can be partially repaid or even completely discharged.

A well-structured Chapter 13 plan can:

• Stop foreclosure and repossession

• Let you catch up on missed payments

• Reduce your debt burden

• Give you peace of mind and a fresh start

If you’re thinking about filing or have questions about your specific case, don’t navigate this alone. Schedule a free consultation with our experienced team at Duncan Law to get honest advice tailored to your situation.