Chapter 13 – “Repayment Plan”

chapter 13 repayment

In a chapter 13 case, the debtor puts forward a plan, following the rules set forth in the bankruptcy laws, to repay creditors over a period of time, usually from future income.  A chapter 13 case may be advantageous in that the debtor is allowed to get caught up on mortgages or car loans without the threat of foreclosure or repossession and is allowed to keep both exempt and nonexempt property.  Additionally, the debtor may  strip a second mortgage or even reduce the interest rate on existing secured loans, such as a vehicle loan.

The debtor’s plan is a simple document outlining to the bankruptcy court how the debtor proposes to pay current expenses while paying off all the old debt balances. The debtor’s property is protected from seizure from creditors, including mortgage and other lien holders, as long as the proposed payments are made. The plan generally requires monthly payments to the bankruptcy trustee over period of three to five years. Arrangements can be made to have these payments made automatically through payroll deductions.

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