A repayment plan is the essence of a Chapter 13 bankruptcy. Unlike a Chapter 7 bankruptcy, where nonexempt property is liquidated to pay creditors, in a Chapter 13, the debtor submits a plan to the bankruptcy court, while retaining their property. This article will highlight some of the general requirements for a Chapter 13 repayment plan. First, the filing of a plan by the debtor is required under the Bankruptcy Code. But this is a positive thing, because the purpose of the debtor being in a Chapter 13 is to repay some of their debts, but on terms set by the debtor and the Bankruptcy Code, instead of the terms of the creditors. The plan must be be between three and five years. During the period of repayment, the debtor will commit all of their disposable income, that's, the cash left over after their budget is figured, for the repayment of their debts. A debtor can also commit capital in assets they no longer wish to keep as a part of the plan.
The goal of the debtor is to pay as much of the non-dischargeable debts as possible, as well as restructuring the secured debts as favorable as to the debtor as possible. Some of the most typical non-dischargeable debts are recent salary tax liabilities, payroll taxes, domestic support requirements, etc. Paying an IRS tax debt through a Chapter 13 is favorable, since tis repaid without interest or penalties during the duration of the plan, or 3 to 5 years. An individual may save a terrific deal of money by repaying the IRS through a Chapter 13.
Repayment of secured debts, such as automobile loans or furniture loans, may also be beneficial to the debtor. If a debtor is behind on payments for secured loans, a restructuring of their debt will stop repossession of the property by the creditor while the debtor makes payments through the bankruptcy court. The debtor will be required to repay the secured debt at the replacement price tag of the assets. For a vehicle, this often means the debt will be closer to the NADA retail value than the NADA trade in value. However, the interest rate is set by the bankruptcy court, not the creditor, which is often much less. Through a Chapter 13, the debtor will not have to pay the thirty percent interest rate set by many of the large risk auto loan establishments.
Another feature of the Chapter 13 bankruptcy plan is that a mortgage may be cured through the plan. For instance, if you're four months behind on your mortgage at the time of filing, you can catch up those 4 months as a separate payment through the plan, paying the arrearage over the years. The key to this provision is that the debtor will not only have to retain mortgage payments current, but will have the additional sum to pay over 3 to 5 years. Unsecured debts are often not paid anything through a Chapter 13 plan. An unsecured creditor could usually only object if the plan provides that the creditor is being paid under they'd have been under Chapter 7 liquidation. This provision only comes into play if the debtor had nonexempt possessions that'd have been dispersed in a Chapter 7 and the debtor tries to pay an unsecured creditor nothing.
In other miscellaneous provisions, attorney costs can be paid through the plan, as are the fees of the trustee. This may be important if the debtor has little idle cash before filing their bankruptcy situation.
This article is only meant to be a brief outline of the Chapter 13 bankruptcy plan requirements. Every case is distinctive, depending on the debts owed by the debtors, their income, their property and how the assets is held. That's why it is critical to speak with a qualified bankruptcy professional, such as those at www.legalhelpers.com, to learn your rights and choices under the bankruptcy code.
