Even if you work and have a regular income, you may find yourself struggling with debt and considering filing for bankruptcy. Often referred to as the wage earner’s plan, you may decide that seeking Chapter 13 bankruptcy relief best suits your needs and circumstances.
Unlike other options, which may liquidate assets to pay off your debts, you create a plan through a Chapter 13 bankruptcy to pay back certain debts over a three-year or five-year period. As such, you may benefit by understanding how the repayment plan works.
Creating the plan
According to the U.S. Courts, you must file a proposed repayment plan when filing for Chapter 13 bankruptcy. You may submit your plan with your petition or within 14 days of your filing. The plan should dictate regular payments of fixed amounts that you will make to your trustee over the plan period and specify the terms for repaying each of your creditors in full or an agreed-upon lesser amount.
You may have claims that classify as a priority, secured and unsecured. The terms of your Chapter 13 repayment plan should provide for full repayment of your priority claims. Such debts may include taxes, the bankruptcy proceeding expenses or other claims granted priority status under the bankruptcy law.
Tied to collateral, you must include plans to repay your secured claims if you want to keep the securing property. In the case of collateral such as homes or vehicles, you may continue to make the necessary payments over the original schedule. If you have arrearages, though, you must make those up through your plan. Provided you account for all your disposable income over the plan period, you may not have to repay your unsecured claims.