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What to know about the Chapter 13 bankruptcy plan before filing.

Making the repayment plan work plays a vital role in Chapter 13 bankruptcy cases and helping filers achieve a fresh financial start.

Even with a job and steady income, some still find themselves struggling with debt. In order to regain control of their finances and achieve a fresh financial start, they may consider options such as filing for Chapter 13 bankruptcy. Often referred to as the wage earner’s bankruptcy, this option provides the right path to debt relief for many in such situations.

Before petitioning for Chapter 13 bankruptcy, however, those considering this step should make sure they understand the repayment plan.

What does the repayment plan require?

Those seeking Chapter 13 bankruptcy protection will also submit to the court a proposed repayment plan. The plan will lay out a schedule for paying back priority and some secured debts to creditors. The specific details of the plan depend on factors such as people’s income, reasonable expenses, and debts.

Typically, the court requires Chapter 13 filers to apply all their disposable income over the plan period toward the repayment of their debts. Disposable income generally includes the earnings or certain other funds that people receive minus their eligible reasonable expenses. Eligible expenses often include, for example, the cost of rent or living accommodations, food, and health care.

When does the repayment plan get filed?

Filers themselves, or with the assistance of a legal representative, must develop the repayment plan using the appropriate forms. They may submit their proposals to the court along with their initial bankruptcy petitions. Alternatively, they must file their plans with the court within 14 days of their filings.

When do payments start?

With few exceptions, people must start making the payments as outlined in their Chapter 13 plans within 30 days of submitting their bankruptcy petitions to the court. Sometimes, the court may have yet to approve their plans. That does not, however, put off the start of their payments. After the court approves the plans, the trustees will begin allocating the payments as indicated.

Within 21 and 50 days of bankruptcy filings, the trustee assigned to the case will hold a meeting of the creditors. At this time, creditors have the option to ask questions about the proposed plan terms and the filers’ financial affairs. At this time or during the confirmation hearing, creditors and the court will have the right to challenge plans with terms they do not find acceptable.

What if filers miss payments?

Missing payments has the potential to seriously affect people’s Chapter 13 bankruptcy cases. Depending on the circumstances, those who fall behind or stop making their payments entirely may have their cases dismissed altogether or converted to Chapter 7 cases.

Upon successful completion of their repayment plans, people who file for Chapter 13 bankruptcy commonly have their remaining eligible debts discharged by the court.

Bankruptcy isn’t about giving up. It’s about taking action to rebuild your credit and your financial health. We have seen year after year, client after client, how a well-crafted bankruptcy can dramatically improve people’s lives. It costs you nothing to take action and schedule a free consultation with one of our Miami Chapter 13 bankruptcy lawyers to discuss how Florida bankruptcy laws can help you.

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