One hundred thousand dollars sounds like a fact. In bankruptcy it is barely a starting point.
Two people can walk in with the same total and leave with completely different plans. The reason is composition. What kind of debt it is matters far more than how much of it there is.
Three Buckets
Debt sorts into three groups, and each behaves differently.
Secured debt is tied to property. A mortgage, a car loan, a furniture contract with a lien.
Priority debt is unsecured but jumps the line. Recent income taxes, child support, and spousal support sit here.
General unsecured debt is everything else. Credit cards, medical bills, personal loans, most old collections.
Why the Mix Changes the Payment
In a Chapter 13 plan, priority debt generally has to be paid in full. Arrears on a mortgage you intend to keep have to be caught up through the plan.
General unsecured debt often gets paid a percentage, sometimes a small one.
So picture two filers. One owes ninety thousand in credit cards and ten thousand on a car. The other owes ninety thousand in back taxes and child support and ten thousand in cards.
Same total. The second filer’s plan payment is far larger, because most of that debt cannot be reduced.
If you are trying to picture how a six figure balance actually gets handled from filing through discharge, see this guide for how the pieces come together in a Kentucky case.
Property Changes It Again
A renter with a hundred thousand in cards is a simpler case than a homeowner with the same balance and real equity.
Equity has to be protected or accounted for. That is what pushes some filers from Chapter 7 toward Chapter 13, even when income would allow Chapter 7.
A comaker on any of the debt adds another layer, because their exposure does not disappear when yours does.
Retirement accounts sit differently again. Most are protected, which is why cashing one out to pay cards before filing is usually the wrong move.
Some of It May Not Be Dischargeable at All
Tax debt has age and filing rules. Older assessed taxes can qualify. Recent ones generally do not.
Student loans require a separate showing of hardship. Support obligations do not go away.
So a hundred thousand dollar total might be ninety thousand of clean unsecured debt, or it might be sixty thousand that survives the case. The label on each line changes the answer.
Income Decides the Chapter
Here is the part that surprises people most. The debt total does not decide which chapter you file.
Income does, through the means test, measured against the median for a household of your size.
Someone with modest income and a large balance may qualify for Chapter 7 without difficulty. Someone with strong income and a smaller balance may not.
Where the Median Figures Come From
The income figures are published, not estimated. The U.S. Trustee Program posts the state median family income tables and expense standards used for means testing, updated on a set schedule.
Household size matters as much as the income figure. Counting the household correctly is not always obvious, and getting it wrong changes the result.
Sort Before You Total
A useful exercise takes about an hour.
List every debt. Mark it secured, priority, or unsecured. Note whose name is on it. Note whether you want to keep the property attached to it.
The picture that emerges is far more useful than a single number. It is also the picture a lawyer needs before saying anything meaningful.
Households in Jefferson, Oldham, Bullitt, Spencer, Nelson, and Meade counties bring in that list every week, and the total on the bottom line is almost never the interesting part.
If you want that sorting done properly, call 502-625-0905.
