If you’re considering filing bankruptcy, don’t automatically assume that Chapter 7 bankruptcy is the only option. For some, Chapter 13 bankruptcy may be a better solution.

With Chapter 13 bankruptcy , you submit a repayment plan to the bankruptcy court. The plan outlines how you intend to repay your debts over the designated repayment period (from three to five years). Chapter 13 bankruptcy plans are based on the petitioner’s household income and expenses. Expenses considered during a Chapter 13 bankruptcy include standard costs like food, utilities, taxes, and medical care. Once the bankruptcy court approves the Chapter 13 repayment plan, the petitioner makes their payments as agreed for the whole three to five-year period. If they make all their regular payments according to the bankruptcy court-approved repayment plan, the court may discharge most or all of the remaining debt.

For some, a Chapter 13 bankruptcy can be the legal tool that puts them on a clear path to debt-free. The bankruptcy court-approved repayment plan is like a customized road map to paying off debt. Chapter 13 helps petitioners restructure their debts with one bimonthly or monthly payment fulfilling their liability. The amount of the Chapter 13 payment is determined by considering numerous factors: any required tax payments, household income, cost of living expenses, and the total of all eligible debts.

During a Chapter 13 bankruptcy, all debts are not treated equally. Some debts may not receive full payment. Under Chapter 13 bankruptcy, debts are split into three categories: Priority, Secured, and Unsecured.

Priority debts are paid off during the Chapter 13 repayment plan with some exceptions. Some examples include back taxes, past due child support, past due spousal support, etc.

Secured debts are debts that are backed by collateral. For some secured loans, you may be required to pay back the value of the collateral (the item backing the loan) or the total value of the debt. An experienced attorney can help you determine how your secured debts could be treated.

Unsecured debts are mainly credit card balances but also include personal loans and medical bills. Unsecured debts are last in line for payment during a Chapter 13 repayment plan. Many do not receive full payment under the terms of the bankruptcy. When an unsecured debt is not paid in full by the end of the agreed on Chapter 13 repayment plan, the remaining debt is discharged.

If you are filing bankruptcy in Georgia or Tennessee and have questions about how bankruptcy can help with tax debt, contact Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.

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