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Bankruptcy Law Blog

Thursday, December 12, 2019

How Does A Chapter 13 Repayment Plan Work?

If you are interested in filing for bankruptcy under Chapter 13 of the Bankruptcy Code, you have probably heard at least a little bit about the repayment plan at the center of the process. You know you must make court-supervised payments to your creditors over a 3 to 5 year period, then some or all of your remaining debts are forgiven. But you may be wondering how the repayment plan actually works. In this post, we are going to go a bit deeper and examine the nuts and bolts of the repayment plan process. 

How Are Repayment Plans Determined

The first thing to note about the repayment plan is that you will probably not pay back all of your debts, even over a 3 to 5 year period. So, repayment is a bit of a misnomer. Instead, you will work on getting caught up on your payments so you are no longer behind. 

If the court thinks you will be able to get caught up on your payments and stay up to date with them after your bankruptcy case is closed, it is going to let you hold on to more assets. This is why many people prefer filing under Chapter 13 to filing under Chapter 7. If you have a piece of property, a second car, a boat, or another large asset that it is important for you to hold on to, Chapter 13 can help you do so. If you file under Chapter 7 you are going to be forced to liquidate most of your assets. 

Debts tied to assets, are one type of debt that will not be forgiven at the end of the Chapter 13 process. You get to keep the asset and keep paying for it instead of having it repossessed. 

Other debts that will not be forgiven include student loan debt, tax debt, and unpaid child or spousal support. There are exceptions to this of course, but they are few and far between. 

The Assets Factored in a Plan

The assets you will be able to hold on to, and the amount you will have to pay to the court each month depends on multiple factors that boil down to:

  • Your debts,
  • Your income, and
  • The cost of living in your area of the state, with your marital status and household size.

You and your attorney will craft a repayment plan that you believe the court will approve based on the factors above. Once the court okays it, you start making payments to the court, which then funnels them to your creditors. 

The courts have overseen so many bankruptcy cases they will have a very good idea of how much you can afford to pay your debtors each month. The length of your repayment plan will also be dictated by how much you can afford to pay each month. 

While it is possible to file your own bankruptcy petition and craft your own repayment plan, it is not advised. If you make any errors, the court could throw out your case, or force you to file under Chapter 7. Working with an experienced attorney will help ensure that your case is handled properly so you can be successful. 


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”