People sometimes refer to Chapter 13 bankruptcy as a wage earner’s plan. That nickname comes from the mandatory repayment plan. A filer must meet with the court-appointed bankruptcy trustee and representatives from their creditors to work out an arrangement for paying down their debts before the courts eventually grant them a discharge. Repayment plans require monthly payments made to the courts, which the trustee then distributes to creditors.
Those considering Chapter 13 bankruptcy may worry about getting locked into an aggressive payment plan that consumes much of their income and lasts for years. What are the typical requirements for a Chapter 13 plan?
Every filer has unique circumstances
The laws regulating Chapter 13 bankruptcy outline standards for repayment plans, but the terms imposed are different in every case. The duration of payments can be anywhere from three to five years.
The amount the filer pays monthly is frequently less than the combined monthly minimums for all of their financial obligations. However, there is often an expectation that they should commit most of their disposable income to those payments. The amount of debt they carry, the value of their personal holdings, their income and even the nature of the debts owed can all influence how much a filer pays each month and how many months they must make payments.
Those who have a bankruptcy lawyer supporting them at creditor meetings and while developing proposed payment plans are in the best situation possible to arrange a sustainable plan. Having support can take much of the uncertainty and stress out of a Chapter 13 bankruptcy.