When people are facing difficult economic times, they may turn to bankruptcy in order to get some debt relief. Chapter 13 bankruptcy, in particular, is a popular way for people to keep valuable property and still get debt relief. It is also an important option for those consumers that do not qualify for Chapter 7 bankruptcy. In order to get a discharge of your debt in a Chapter 13 bankruptcy, you need to submit and complete a repayment plan. The length of the repayment plan will depend on certain factors, but the requirements will stay the same for most debtors. This repayment plan must be submitted to the court within 15 days of the filing of the bankruptcy petition, in most cases, or else a debtor risks the dismissal of their petition.
Under the repayment plan, you must allocate how you are going to pay back debts. Debts are split into three types. First, there are priority debts — including taxes, and costs relating to the bankruptcy. These debts must be paid in full under the repayment plan.
The second type of debt is secured debt. This is debt that is secured to collateral which the creditor can take if the debt goes unpaid. If you want to keep the collateral, the plan must pay any arrears in full. Additionally, the creditor must receive an amount at least equal to the value of the collateral under the plan.
The final type of debt is unsecured debt. The repayment plan must allocate all disposable income to the repayment of unsecured debt during the repayment period. These creditors must receive at least as much as they would receive under a Chapter 7 bankruptcy.
Creating a repayment plan can be a difficult process. People should make sure they understand what they will have to pay before deciding to move forward with a Chapter 13 bankruptcy. A qualified attorney can make this process easier.
Source: Findlaw.com, “Chapter 13: Repayment Plan and Confirmation Hearing,” accessed Oct. 6, 2014