§ 8.1     Debtor Wants to Pay Creditors
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 8.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

Some debtors sincerely want to repay their creditors. Other debtors want or need to be immediately free of debt.


Chapter 13 is not involuntary servitude. It is a purely voluntary chapter, and only debtors with at least some desire to pay their creditors should be encouraged to undertake the discipline and years of commitment necessary to consummate a Chapter 13 plan.


Assessing the strength of a debtor’s interest in paying creditors is not simple. The process necessarily includes a complete explanation of bankruptcy and Chapter 13 by debtor’s counsel.1 The debtor must choose either the repayment of debt over a period of years often by deductions from the debtor’s paycheck or the instant gratification of a Chapter 7 discharge. The sincerity of the debtor’s commitment to repayment can determine the outcome, especially if a challenge to confirmation places the debtor before the court to demonstrate good faith or feasibility.


Debtors with little or no interest in repaying creditors should not be encouraged to seek Chapter 13 relief. Such cases almost always fail, and the debtor ends up paying attorney fees and filing fees for little real debt relief. Many reported decisions reject “abusive”2 Chapter 13 filings based on the debtor’s failure to demonstrate real intent to repay creditors.


After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),3 there are debtors who “fail” the “abuse” test for admission to Chapter 7 in 11 U.S.C. § 707(b) and then face dismissal from bankruptcy altogether unless they convert to Chapter 13.4 In a sense, some of these individuals become involuntary Chapter 13 debtors—debtors forced into Chapter 13 for reasons other than desire to pay creditors. There has been no focused study of this group to determine how they fare as forced convertees to Chapter 13. There is no evidence that forcing some debtors out of Chapter 7 and into Chapter 13 has a favorable impact on creditors. In fact, recent studies indicate that BAPCPA has reduced the dividends paid to secured and unsecured creditors in Chapter 13 and Chapter 7 cases.5