How a Chapter 13 Debt Repayment Plan is Formulated

Even if you’re collecting a steady paycheck, it’s very easy to fall behind on your bills, particularly if you’ve gone through a divorce, temporary job loss or medical problem. For many people in this situation, Chapter 13 bankruptcy provides a chance to stop creditor harassment and establish a fair debt repayment plan that allows them to hold onto their home and other key possessions.

If you are considering Chapter 13 bankruptcy, you’re likely concerned about the factors used to set a repayment schedule. Consulting with an attorney who has significant experience creating Chapter 13 plans will help you understand how your household budget should look once the court approves a repayment plan. Key elements that you can discuss include:

• Duration — Depending on your particular circumstances and how your income compares with the state’s median, your repayment plan will last between three and five years.
• Priority debts — Though bankruptcy is effective in many ways, there are some obligations that cannot be altered by filing. These are known as priority debts. Any taxes, child support or alimony that you owe usually must be repaid in full under the terms of the plan.
• Mortgage payments — One of the main reasons people choose Chapter 13 bankruptcy is to preserve their residence. Mortgages are secured debts, which give lenders the right to foreclose on the property in question if payments aren’t made in accordance with the terms of the loan document. Your repayment program will include a schedule that, if followed, will prevent foreclosure. If you have a second mortgage or home equity line of credit that is in arrears, you might be able to obtain relief for those debts as well.
• Unsecured debts — Credit card bills, medical expenses and other unsecured debts are addressed in a repayment plan after the trustee evaluates the filer’s income and other obligations. Through longer payment periods, lower interest rates, waiver of penalties and the elimination of obligations that remain after the repayment schedule is completed, individuals seeking financial relief can lower their monthly burden to a manageable level.

Developing an appropriate Chapter 13 repayment structure that will be acceptable to the trustee and court is a complicated task, so it’s worthwhile to seek counsel from an accomplished bankruptcy attorney and start your financial recovery process as soon as possible.

Weiss, Schmidgall and Hires, P.C. in Merrillville assists Indiana residents with the creation and submission of Chapter 13 bankruptcy debt repayment plans. To schedule a free consultation regarding your situation, call 219-293-8988 or contact us online.