Creating a Repayment Plan For Chapter 13 Bankruptcy

When filing Chapter 13 bankruptcy, one of the steps an individual must do is to file a repayment plan. This plan is guided by the means test the individual obtains as part of the bankruptcy process. In short, the repayment plan must indicate how much money is coming in, which expenses will be paid and how this will occur over the next three to five years.

How to Create a Repayment Plan

When filing Chapter 13 bankruptcy, it is always advisable to work with an attorney. The attorney will be able to fill out all documentation for the bankruptcy, including the repayment plan documentation. In addition, the attorney will handle the means test, which determines if you can file bankruptcy at all.

There are several aspects to this type of repayment plan all individuals should know about before filing bankruptcy. They include:

All unsecured creditors may be given as least as much as they would have received had the borrower filed Chapter 7 bankruptcy.
The plan will also provide that unsecured creditors will be given an amount that is equal to the bankruptcy filer’s monthly disposable income. However, this number is multiplied by 36 for those under their state’s state median and by 60 if the individual is above the state’s median income.
All priority claims must be paid in full, up to the value of the secured loans. This does not apply to real estate, but to car loans and other types of secured loans.
The plan must then be approved by the bankruptcy court. The bankruptcy court can reject the claim if and when it feels that the borrower is unable to make such a plan work (because he or she does not have the income to do so.)
The bankruptcy court will approve the plan, which begins the repayment period, which will last between three and seven years.

Individuals should use the aid of an attorney whenever possible in creating the repayment plan. The courts will expect that those filing for bankruptcy on their own have a solid understanding of what is occurring. A lack of knowledge can get the case thrown out of bankruptcy court.

Hiring an Attorney Is Critical

Whenever an individual is filing for bankruptcy, it becomes very important for that individual to use the services of an attorney to do so. The attorney can ensure that the repayment plan is formatted properly to ensure that it abides by all state governing laws related to the bankruptcy case.

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