What to know about your repayment plan

On Behalf of | Apr 15, 2022 | Bankruptcy, Chapter 13 |

If you file for Chapter 13 bankruptcy in Florida, you will be required to make payments to creditors for a period of three or five years. The amount that you are required to repay each month is based on the type of debts that you have and the amount of disposable income you have each month.

You must submit a repayment plan when you file for Chapter 13 protection

You must submit a payment plan after submitting your bankruptcy petition. After your plan is presented to the court, the judge overseeing the case will review it and either approve or reject it. Your creditors will also have an opportunity to review the plan and challenge it if it doesn’t seem fair to them. If your proposal is accepted, you will then be responsible for sticking it for the duration of the repayment period.

Who gets paid first?

Priority creditors will be paid first, and priority debts include back taxes, back child support and alimony payments. Secured creditors are next in line to be paid, and examples of secured debts include a home, mortgage or a personal loan that you guaranteed in some fashion. Finally, unsecured creditors will be repaid if there is any money left to do so.

What happens to an unpaid balance?

At the end of your Chapter 13 repayment period, the remaining balance on most unsecured debts will be discharged. Any balance that remains on a secured debt will generally need to be paid off if you wish to keep your home, car or other personal property. If you still owe money to a priority creditor, you must reaffirm that debt to avoid a repossession or other penalties.

Filing for Chapter 13 bankruptcy may be an ideal way to regain control of your finances. You will receive an automatic stay after filing a bankruptcy petition, and, if you adhere to the plan, this will allow you to put an end to creditor collection activities for the duration of your case.