In this article, you can discover…
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- How a Chapter 13 bankruptcy repayment plan works.
- How long to expect this plan to last.
- Whether a plan can be modified if your financial situation changes.
What Is A Chapter 13 Repayment Plan?
When you file Chapter 13, you create a plan to reorganize your debt. What might this look like?
Let’s say you’re $10,000 behind on your mortgage payments. In the Chapter 13 plan of reorganization, we put that $10,000 in your plan to be paid to a Chapter 13 trustee over the course of a commitment period.
A commitment period for Chapter 13 bankruptcy must be at least 36 months but not longer than 60 months. If you are behind on car payments, this plan can incorporate those missed payments into the balance, helping you keep your house and your vehicle.
What Factors Determine The Length Of Your Chapter 13 Repayment Plan?
Income levels are a significant factor. If you go above the median income for your household size in the United States, you are obligated to be in a Chapter 13 plan for 60 months. If you’re below the median income for your household size, you can be in a Chapter 13 plan for as little as 36 months.
In many cases, regardless of your income level, you’ll be put on a 60-month plan. This helps keep your payments more affordable and easier for you and your family to manage in the long run.
How Are Debts Prioritized In A Chapter 13 Repayment Plan?
Secured creditors are typically paid first in a plan, followed by protection payments to a car creditor, attorneys fees, and administrative fees for the trustee every time a payment is made. Finally, general unsecured creditors will be paid.
Attorney Mike Wallace is an insightful attorney serving Texas. For nearly 20 years, he’s helped clients just like you understand their Chapter 13 repayment plans and efficiently get out from under debt.
Have questions about Chapter 13 bankruptcy? Interested in learning more about your options? Reach out to Mike Wallace, P.C., at (888) 402-5557 for an initial consultation today.
Can A Chapter 13 Repayment Plan Be Modified If My Financial Situation Changes?
Most repayment plans can be modified, and there are circumstances where that is appropriate. Reasons for modifying a plan may include a reduction of your income, leaving you with less money to make payments. In cases such as this, your attorney may be able to work out a modification that lowers your monthly payments.
What Are The Common Challenges People Face With Chapter 13 Repayment Plans?
One of the most important things to do is to stay disciplined in making sure that planned payments are made on time and in full. Some clients struggle with this, but part of a successful repayment plan involves being on top of payments and making paying them on time a top priority.
Insights From Years Of Practice
In my nearly 20 years of Chapter 13 bankruptcy work, I’ve learned that there are a myriad of different financial situations where someone can benefit significantly from Chapter 13 bankruptcy.
One very specific thing that I have learned is that there are instances where we can save someone a significant amount of money by using Chapter 13 to pay a car creditor what the vehicle is worth rather than what is owed on the vehicle at the time of filing.
This is known as a “cram down”, and it’s quite useful. I’ve guided many clients through this process. You can cram down vehicles and manufactured homes as long as they are still personal property and have not been made part of the real estate.
Still Have Questions? Ready To Get Started?
For more information on Understanding The Chapter 13 Repayment Plan, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (888) 402-5557 today.
