What is a Chapter 13 Repayment Plan?

If you are considering filing a Chapter 13 bankruptcy, you must have a regular source of income. You can establish a repayment plan that allows you to reorganize your finances and outline how you will pay your creditors. The plan will last three to five years, depending on the amount of your income and level of debt, and the bankruptcy court must approve it. During the time your Chapter 13 plan is pending, you will make your monthly payments to the trustee assigned to your case. The trustee will pay your creditors as set forth in your plan.

Bankruptcy law ranks the priority of your debt and your plan must pay your creditors according to their priority.

Priority Claims

The most common type of priority claim is taxes which are given special status under the law. Priority claims must usually be paid 100%.

Secured Claims

If you have a loan where you pledged an asset to secure the debt, it is secured. The most common examples of secured loans are a mortgage and vehicle loan. If you want to keep possession of the collateral pledged to your secured lender, the law requires you to pay at least the value of the asset.

Unsecured Claims

Your unsecured creditors must be paid a percentage (0-100%) of what is owed. The law requires a debtor to pay all of his or her projected “disposable income” over an “applicable commitment period.” You must also pay your unsecured creditors at least as much as they would have been paid if you had filed a Chapter 7 bankruptcy.

Chapter 13 cases can be complex and they require strategic planning. It is important to obtain the help of a seasoned bankruptcy attorney at Nielsen Law Group for help. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.