One of the possible consumer bankruptcy chapters that some people file when they need this protection is Chapter 13. This is known as the wage-earner’s bankruptcy because debtors have to set up a repayment plan that covers some of the debts they owe. In most cases, the payment schedule will coincide with the debtor’s pay schedule.

Understanding which debts must be paid under this type of bankruptcy can help you to determine whether this is the right decision for you or not. There are three types of debts that apply to these cases — secured, unsecured and priority. Each debt you have is placed into one of these categories.

• Secured debts are backed by assets, such as vehicle loans or mortgages. These must be paid in full as part of the repayment plan you set up with the bankruptcy trustee.
• Unsecured debts aren’t backed by assets. Credit card and medical debts fall under this category. You must repay at least part of these debts in your repayment plan.
• Priority debts include things like back taxes and child support arrearages. These must be paid in full during the bankruptcy proceedings.

Once your bankruptcy repayment plan is determined, you must comply with it. If you miss a payment, there is a chance that your case might be dismissed by the bankruptcy court. This would allow creditors to start collection attempts again. It might be possible to avoid this from occurring, but you should explore the possibility right away if you know you are going to miss a payment.

Don’t start 2019 off mired in debt. Learn how you can use a bankruptcy filing to your advantage in the new year.