The repayment plan is one of the main differences between Chapter 13 and Chapter 7 bankruptcy. Filers pursuing Chapter 13 relief have to commit to a structured series of payments that may last anywhere from three to five years.
They pay down their eligible unsecured debts and may also make modifications to their secured financial obligations, such as their mortgages or vehicle loans. The repayment plan helps reduce the total amount of debt that the filer discharges at the end of the bankruptcy process. Who determines the specific requirements of a Chapter 13 repayment plan?
The filer proposes the initial plan
Chapter 13 bankruptcy is often helpful for those who earn competitive wages and those who have assets that they cannot exempt from liquidation in a Chapter 7 bankruptcy. Instead of promptly securing a discharge, they must commit much of their disposable income toward monthly payments.
The Chapter 13 repayment plan is the result of a meeting with the bankruptcy trustee appointed by the courts and representatives from individual creditors. At that meeting, the filer proposes a plan based on their income, their household budget and the totality of their financial obligations.
The trustee and creditor representatives attending the meeting can question or challenge the terms proposed by the filer. The process of fine-tuning the arrangements can take hours to complete. Provided that a borrower completes all of their payments as required, they may be eligible to discharge the remaining balances due at the end of the bankruptcy process.
Learning more about Chapter 13 bankruptcy proceedings can be beneficial for those facing creditor lawsuits, foreclosures and other damaging collection efforts. Chapter 13 bankruptcy can be a viable option for those with assets they want to protect from liquidation or income high enough to prevent them from qualifying for Chapter 7 bankruptcy.
