In Chapter 13, debtors repay the majority of their debts. Any debt that is not repaid is either discharged or paid through the sale of the debtor’s assets. In bankruptcy, “discharge” means that the debtor is not legally obligated to repay the debt. For debts to be repaid, debtors must put together a repayment plan that meets court requirements.
How Long does a Chapter 13 Repayment Plan Last?
A repayment plan in Chapter 13 can last either three or five years. Courts may grant extensions if a debtor cannot finish a three-year plan within the allotted time. The length of time you get depends on the results of your means test.
Will my Plan be Approved by the Judge?
Your local bankruptcy court will approve your repayment plan if it meets these requirements:
- You must give all of your available income. “Income” and “wages” are not the same -; in one case, a judge allowed a debtor’s family to pay.
- The plan must be feasible. Courts treat this requirement leniently, but monthly payments cannot exceed income.
- It must be fair to creditors. Unsecured creditors (such as credit card companies) cannot receive less than they would have gotten had you chosen Chapter 7 bankruptcy.
- Plans must be offered in good faith and must obey the law.
If you Cannot Complete Your Plan
If you cannot meet your plan’s terms, you have four choices. The bankruptcy court may:
- Dismiss your case -; this is the worst possible outcome; you’ll have spent years sending your disposable income to creditors, but you will still be responsible for the debts.
- Convert the case to Chapter 7 -; You will lose assets and time, but the case will conclude and you may still get some debts discharged.
- Modify the repayment plan -; the bankruptcy court may adjust the plan time, the monthly payment, or the amount allotted to each creditor.
- Discharge debts -; You can be granted a discharge even if you do not finish your plan. However, you must prove that uncontrollable circumstances prevented you from finishing the plan, and that modifying the plan would not be feasible.
Hiring a Chapter 13 Bankruptcy Lawyer
A Chapter 13 bankruptcy case can be complex, and the creation of a court-approved repayment plan is difficult in itself. Hiring a Chapter 13 Bankruptcy Lawyer with Ledford and Wu can make a substantial difference, and increase the chances of plan approval.
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