How A Chapter 13 Repayment Plan Works

If you owe money to numerous creditors and feel overwhelmed with your debt load, you might want to consider filing for Chapter 13 bankruptcy. Chapter 13 provides a way to lump your debts into one, and you complete the case in three to five years. When using Chapter 13, you will have a repayment plan to follow, and here is an explanation of how this works.

Your Attorney Analyzes Your Debts and Income

The first step for a Chapter 13 case is analyzing your debts and income to ensure several things. First, your attorney does this to make sure you can afford to repay your debts based on your current income level. Secondly, they do this to see how much your payments should be each month. As the attorney reviews your debts, they will separate them into categories. A Chapter 13 case focuses first on repaying your priority debts, which are the most important debts you owe. Your mortgage debt falls into this category.

They Create a Repayment Plan

After reviewing all these details, your bankruptcy lawyer will create a repayment plan. The plan will tell you how much money you must pay the court each month for your debts. It will also show how much money you will have left after paying the court for your debts. You will have enough money to pay your other bills, such as groceries, gas, and eating out.

You Make the Payments

Once the court approves your plan, you will be set in place to go with it. When this occurs, you will begin making your payments to the court. The court will take them and divide them between your creditors as stated on the plan. Little by little, you will repay your debts through your Chapter 13 repayment plan.

You Update Your Plan if Circumstances Change

During your plan, things in your life might change. For example, you might get a raise at your job. You could also encounter another debt you must pay. When things like this change, you will notify the court of the changes, and they might modify your plan to account for them.

If you make every required payment in your plan, the court will review your balances and may forgive some of the remaining debt. Completing a Chapter 13 plan will help you pay off your debts and provide relief to you. If you have questions or want to file, call a bankruptcy law firm today.