What to know about Chapter 13 repayment plans

On Behalf of | Mar 12, 2020 | Chapter 13 |

If you are going to file for Chapter 13 bankruptcy in Florida or most other states, you must submit a payment plan as part of the application. In some cases, you’ll have 15 days from filing for reorganization bankruptcy to do so.

Understanding the different types of creditors

A creditor in a Chapter 13 case will be given one of three labels: priority, secured or unsecured. Priority creditors must generally be paid in full, and they generally seek to collect debts such as unpaid taxes or back child support. Secured creditors have an interest in an asset such as a house or a car, and they are given higher priority over unsecured creditors. Unsecured creditors generally don’t have any right to collect on a debt if there is no money to pay it.

Payments are made over three or five years

Payments to creditors are made for either three or five years depending on your current income levels. The repayment period is three years if your income is less than the state median for a household of your size. Otherwise, you will need to make payments for five years. If you fail to make a payment on time, it is possible that the case will be dismissed. The case could also be dismissed or converted to a Chapter 7 proceeding if you fail to file a tax return or pay child support.

Debtors can keep assets in a Chapter 13 case

If you wish to retain assets such as a home or a car, you may do so as long as you stay current on the monthly payments. Furthermore, if you are currently in arrears, you must make an effort to repay any amounts that are currently past due.

Those who are considering filing for bankruptcy may want to consult with an attorney before doing so. He or she may talk more about how to create a payment plan or how to comply with credit counseling requirements.