Like others in Texas and elsewhere, you may have a regular income but still find yourself struggling with overwhelming debt. This may lead you to consider debt relief options such as filing for Chapter 13 bankruptcy. The crux of these types of cases, it is essential that you understand the Chapter 13 repayment plan before taking this step.
Unlike Chapter 7 cases, filing for Chapter 13 bankruptcy does not require you to relinquish certain property and assets in order to pay back your debts. Rather, filing for Chapter 13 bankruptcy is akin to obtaining a consolidation loan. Through this type of filing, you must develop a plan which provides for the repayment of your debts with your income.
According to the U.S. Courts, Chapter 13 repayment plans must provide for payment in full of your priority claims. These include most taxes, as well as the costs of your bankruptcy proceeding. If you want to retain the collateral associated with secured claims, your plan must also include payment for these obligations. Provided you will pay all your anticipated disposable income toward your plan and they receive as much as they would through a Chapter 7 case, you may not be required to pay back your unsecured debts.
With few exceptions, the term for your Chapter 13 repayment plan must be five years. While there are cases in which you may establish a shorter plan or pay off your debts sooner, the law does not allow plans to provide for payments over more than five years.
Whether your plan has been confirmed or not, you must begin making payments in accordance with your plan within 30 days of filing your bankruptcy petition. These payments are made regularly to your court-appointed trustee throughout the duration of your case, and they may be made directly or via a payroll deduction. The trustee then distributes monies from those payments to the appropriate creditors.
The information in this post is meant for general purposes only and should not be considered legal advice.