If the debtor is unable to get caught up on payments during this period, he will still be subject to foreclosure at the end of the reorganization. Any excess debt that is not satisfied through the sale of the property will become unsecured debt. If the debtor keeps the property, the reorganization plan will require the debtor to repay the debt up to the value of the property. The excess amount of debt will be converted to unsecured debt. The difference between secured and non-secured debts is the order in which they are repaid.
Secured debts have a priority over non-secured debts.
Non-secured creditors share whatever amounts are left over after priority claims have been satisfied. In a Chapter 13 bankruptcy, some of the debtor's payments will go to unsecured creditors. The unpaid portion of the non-secured debts will be discharged at the end of the reorganization period. All Rights Reserved.