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How to create a Chapter 13 bankruptcy plan

On Behalf of | Nov 2, 2023 | Chapter 13 Bankruptcy |

Many Tennessee residents who are facing insurmountable debts choose to file for Chapter 13 bankruptcy. This requires the creation of a proposed repayment plan, which has to be submitted within 15 days of filing the petition.


The first step in creating a Chapter 13 bankruptcy plan is writing a budget. Once you know how much you need for your basic living expenses, you can work out paying off your debts with the remaining income. You might have to brainstorm creative ways of reducing your living expenses to obtain the required plan approval.

Required debts to repay

federal law requires a repayment of child support, alimony, the costs of filing for bankruptcy and taxes under a Chapter 13 bankruptcy. These are priority debts. You may also need to account for repaying your secured debts to avoid losing your collateral. If you would prefer to give up the collateral, you may do so. Some secured debts don’t need a full repayment. You might want to negotiate before surrendering the property. Because the value of cars depreciates, you may be able to pay it off at a lower cost.

If you have income left over after planning for repaying your priority and secured debts, then it must go toward your unsecured debts. You can subtract your necessary expenses, such as housing and food, when you calculate how much disposable income you will have. Chapter 13 bankruptcy law requires that creditors receive at least what they would in a Chapter 7 bankruptcy.

Repayment period

If your monthly income is below Tennessee’s median, then your repayment plan has to be three years long. For those who have an income above the median, they need to create a five-year plan. Applicable law takes your family’s size into consideration when determining if you’re above or below the median.

Repayment method

Under Chapter 13 , you have two options on the method of repayment. You could transfer the money that you allocated for repaying your debts to the trustee of your case. The other option is an automatic deduction from your paychecks.

Chapter 13 bankruptcy law has certain restrictions in place on how you can craft your repayment plan. This is to ensure that creditors receive an adequate amount. Judges must approve your plan based on whether it’s practical and in line with the law.