Chapter 13 bankruptcy cases rest largely on the creation and completion of repayment plans. Due to any number of factors, you may find yourself struggling financially, despite having a regular income. To achieve a fresh start, like others, you have likely considered options such as filing for bankruptcy.
If considering seeking Chapter 13 protection, understanding how the repayment plan works may help you ensure that path best suits your circumstances and needs.
Addressing priority claims
According to the U.S. Courts, a Chapter 13 bankruptcy plan should include reimbursement for all priority claims. Exceptions exist for domestic support payments if you apply all your disposable income to the plan over its specified period. The court also provides exceptions for situations in which you reach an alternative arrangement with a creditor. Priority claims include bankruptcy proceeding costs, most taxes, child support and alimony obligations, and other such debts.
Making the payments
Part of the successful completion of your case includes making all your scheduled payments in full and on time. Whether the court has approved your plan or not, you must begin paying your case trustee as planned within 30 days of your filing. If circumstances come up that impact your ability to pay, you may pursue a modification through the court.
Discharging unsecured debts
Upon completion of your repayment plan, you will likely have your unsecured debts discharged by the court. Unsecured debts include, for example, outstanding medical bills, credit card balances and utility bills. The discharge relieves you of your obligation to repay, and it stops creditors from making further attempts to collect those debts.
If you face overwhelming debt, you will likely review all your options for regaining control of your finances. Knowing what to expect from a Chapter 13 case may help you determine if that option provides the best path for you.