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What is included in a Chapter 13 bankruptcy repayment plan?

When people are struggling to pay their debts and stay financially solvent, it can seem like there is nowhere to turn for lasting debt relief. However, for many people, filing for Chapter 13 bankruptcy can offer an important respite from the harassing creditor calls and other collection efforts.

Chapter 13 bankruptcy gives Tennessee residents the opportunity to pay back a portion of their debt in a repayment plan. When you file for bankruptcy, creditor collection must stop. People are free to make payments without worrying about losing their home, car or facing other financial trouble. At the end of the repayment plan, any remaining debt is discharged and you are left without debt.

However, under federal bankruptcy laws, repayment plans must meet certain criteria. If the plan does not conform to these requirements then it will not be approved by the bankruptcy court.

The plan must address three types of debt in order to be approved. The first type is priority debt. This is debt that must be paid first before other debt is addressed. The cost of the bankruptcy proceeding and certain taxes are granted priority status.

Next, the repayment plan must address secured debt. This is debt that is secured by some sort of security interest. Under the plan, you must pay back at least the value of the collateral that is secured by the security interest. In some cases, the amount owed can exceed the value of the collateral.

Finally, the plan must address unsecured debt. This is debt where the creditor has no specific right to collect the debt. Under a Chapter 13 bankruptcy repayment plan, disposable income must be used over a period of three or five years to pay back unsecured claims.

Chapter 13 bankruptcy offers many debtors the fresh financial start they are looking for. However, it is a legally complex process. Legal advice from a qualified attorney is often a necessity.

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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