One of the distinguishing characteristics of chapter 13 bankruptcy is the requirement of a repayment plan. Many debtors looking to begin the chapter 13 bankruptcy process often have questions about the repayment plan process. We have created a guide to the repayment plan with everything that you should know.
What is a Chapter 13 Repayment Plan?
Whereas chapter 7 bankruptcy requires no repayment of debts, chapter 13 bankruptcy requires monthly payments to be made over the course of a three to five-year period. You and your attorney submit a repayment plan for the court’s approval, which details your plan to repay creditors over a period of three to five years. This personalized repayment plan serves as the road in your journey to being debt-free, with monthly payment amounts being based on factors like household income and monthly expenses (such as food, utilities, and healthcare expenses). Plans must typically be filed with the bankruptcy court within 14 days of filing the bankruptcy petition (unless an extension has been granted). You can begin repayment once courts approve your repayment plan, and any debts remaining after 3-5 years can be discharged.
What Debts Are Included in a Typical Chapter 13 Payment Plan?
Each type of debt receives unique treatment in chapter 13 bankruptcy, with some debt not requiring repayment at all. As always, it’s important to seek legal counsel about chapter 13 repayment from a trusted attorney, but debt typically falls into one of three categories:
Priority debts are debts that receive unique treatment by the courts and must be paid off during the course of your chapter 13 repayment plan. Examples of priority debts can include child support or unpaid taxes.
Secured debts generally involve property whereby the creditor has a lien on that property. Car loans and mortgages are the most common forms of secured debts, and depending on the specific details of your secured debt, you may have to pay back the value of the collateral or the full debt.
Unsecured debts are not secured by any collateral. Examples include credit card debt, medical bills, student loans, alimony, and personal loans. These debts are usually the “last priority” in a chapter 13 repayment plan, and it’s quite possible to have some of this debt discharged in a chapter 13 bankruptcy. It is, however, important to realize that some forms of unsecured debt are also considered priority debts (such as student loans), and they will require inclusion on your repayment plan.
Parker & DuFresne
Having the right repayment plan is one of the most important keys to a successful chapter 13 bankruptcy case. We understand that calculating a chapter 13 repayment plan can be a lengthy and daunting process for clients. At Parker & DuFresne, our goal is to take the stress out of the chapter 13 repayment process. We specialize in bankruptcy law, striving to get clients across Northeast Florida back on the road to financial stability as we bring them the resources they need for a successful case and a bright financial future. We guide you through the complete process and use our resources to help you develop a chapter 13 repayment plan that will allow you to successfully navigate a clear path towards debt repayment. If you would like to learn more about chapter 13 repayment plans, contact us today!