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How people complete a Chapter 13 bankruptcy repayment plan

Not everyone can qualify for Chapter 7 bankruptcy. There are strict limitations on income, as well as requirements to liquidate personal assets to help repay creditors. Many working professionals dealing with a temporary financial crisis may not be eligible for Chapter 7 bankruptcy.


Thankfully, Chapter 13 bankruptcy is often an option for these individuals. It allows those with more assets and higher income to eventually discharge their unsecured debts. Before the discharge, however, the person filing will have to complete a multi-year repayment plan overseen by the courts.

How does the repayment plan work? When you file for bankruptcy, the courts will appoint a trustee to oversee your bankruptcy proceedings. One of their first responsibilities is to organize a meeting with your creditors. During that meeting, the trustee and creditors will review your finances and discuss a potential repayment plan and budget. Based on your current financial circumstances and the kinds of debt involved, the trustee will arrange a repayment plan that requires monthly payments. You will send one payment directly to the courts, and the trustee will distribute the funds to the creditors. It is common for such repayment plans to last for three years, but they could last for up to five. Once you finished making all of the payments, then the remaining balances on those accounts will be part of your discharge.

Chapter 13 bankruptcy helps you renegotiate debts There are several benefits a Chapter 13 bankruptcy can offer beyond being able to file with more property and higher income. The ability to renegotiate some of your debts, including car loans and mortgages, is very valuable, as lenders may be more willing to cooperate with you during bankruptcy proceedings than they would be if you have simply fallen behind on payments.

Sometimes, individuals who have a Chapter 13 repayment plan experience a financial change, like the sudden loss of their jobs. Notifying the trustee and adjusting your repayment plan may be necessary if you cannot continue to make the payments you originally negotiated in the creditor meeting.

Completing the repayment plan for your Chapter 13 bankruptcy will potentially lead to a discharge of your remaining unsecured debts and help you regain control over your budget.

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