Pennsylvania residents who file Chapter 13 bankruptcy petitions submit plans to the court that detail how they plan to repay their creditors over a three-to-five-year period. Before their payment plans are approved, their creditors are given a chance to review and challenge them. If you are considering bankruptcy, you will probably want to file a Chapter 13 petition and submit a payment plan if you have assets that you wish to protect and you have a regular source of income. Your plan does not have to pay off all of your outstanding debts, but the monthly payment should be the most that you can reasonably afford to pay after covering your basic living expenses.
How much will you have to pay?
You will be expected to make Chapter 13 repayment plan payments for either three or five years depending whether you earn more or less than Pennsylvania’s median income. The paperwork you submit to the bankruptcy court will include a Form 122C-2. This form details your monthly living expenses, and the bankruptcy judge assigned to your case will consult standards provided by the Internal Revenue Service to make sure that your expenses are reasonable.
Priority, secured and unsecured debts
The debts included in a Chapter 13 repayment plan are prioritized. Th highest priority is given to unpaid taxes, outstanding child and spousal support payments and bankruptcy-related legal fees. Your plan must provide enough money to pay these priority debts in full. Secured debts like mortgages and automobile loans are given the next highest priority, and unsecured debts like credit card balances and personal loans are considered the least important obligations in a Chapter 13 payment plan.
A fresh start
Your Chapter 13 payment plan should provide your creditors with as much money as possible while leaving you enough to enjoy a reasonable standard of living. You will have up to 14 days after you submit your Chapter 13 petition to provide the court with your payment plan, and your creditors will be given a chance to challenge it. However, this is unlikely to happen if you complete the necessary paperwork and disclose all of your sources of income. Filing for bankruptcy provides the opportunity for a fresh start, and Chapter 13 payment plans are an important part of the process.