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Information about payments under Chapter 13 bankruptcy

Once a Tennessee debtor realizes that bankruptcy is the only option and Chapter 13 is the optimal choice, there will be other issues that must be fully understood as part of the process. Adhering to the Chapter 13 plan is a key to getting debt relief and a fresh financial start, but debtors might be concerned about how much they must pay back and what will happen if they fail to keep up with the payments. Having information about these issues is crucial to having a successful outcome.

Chapter 13 is a repayment plan bankruptcy in which the payments will be made within three-to-five years, depending on the situation. With Chapter 13, some debts must be fully paid back. These are referred to as "priority debts." They are viewed as more important than others and will be handled first. Child support and taxes fall into this category. Secured debts will be part of the plan if the debtor has fallen behind in them. That includes a home or a car. It must be shown in the repayment plan that all disposable income after the priority debts is going to unsecured debt. Those without disposable income might not have to make those payments if there is a good faith effort to pay them.

People who are in a Chapter 13 might have trouble keeping up with the payments. Perhaps there was job loss or some other issue that hindered the person's ability to pay. The trustee can modify the plan to adapt to the situation. Another issue is if the payment plan constitutes what is known as an "undue hardship." For example, if the person needed medical treatment for an extended period, the judge might discharge the debts by converting the case to a Chapter 7 liquidation bankruptcy.

Filing for Chapter 13 is generally limited to those who have a job and would like to retain certain properties they otherwise would not had they filed under Chapter 7. There are rules to Chapter 13 that must be considered before taking this step. Discussing a case with an attorney who is experienced in the Chapter 13 bankruptcy process can help.

Source: bankruptcy.findlaw.com, "Chapter 13 Reorganization Bankruptcy -- How Much Do You Need To Pay?; Failing To Make Plan Payments," accessed on Nov. 15, 2017

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

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