A repayment plan through a Chapter 13 bankruptcy is a way to start clearing debt for consumers in Pennsylvania. Bankruptcy helps people get out from under considerable debt, but not all filings allow them to keep important assets.
What’s a Chapter 13 repayment plan?
People with regular income can file a Chapter 13 bankruptcy to help them keep important assets like a home or car. A Chapter 13 bankruptcy restructures debt for a three to five-year period. While making regular payments, a person can have some or all of their debt discharged.
The Chapter 13 repayment plan is the legal document that tells creditors how a person will pay the debt. A person needs to submit the legal form within two weeks of filing. The bankruptcy judge and creditors will assess the document and possibly challenge it. After a judge accepts the plan, a person needs to keep making payments.
The debts to pay off
Chapter 13 bankruptcy doesn’t treat all debts equally. Priority debts must be repaid during the process. Priority debts include spousal support, child support, back taxes or bankruptcy filing fees. Secured debts come with collateral, and people usually pay the value back. Secured debts include a car loan or a mortgage. Unsecured debts are the last priority and sometimes aren’t repaid fully. Unsecured debts include unsecured personal loans, credit card debts or medical bills. The courts discharge unsecured debts much of the time.
The creation of a repayment plan
Calculations for the Chapter 13 bankruptcy repayment plan can be complex because they require totaling all a person’s assets and liabilities. For example, form 122C-1 determines a person’s monthly average income and payment length. Form 122C-2 determines the amount of disposable income for repaying creditors. The means test allows a person to figure out how much extra money they have for repayment. After the means test, a person can create a repayment plan.
A Chapter 13 bankruptcy repayment plan allows a person to pay back their debts in order of priority and keep important assets. After the person makes a repayment plan, the contract needs to go to a bankruptcy judge to be finalized.