How Does a Chapter 13 Payment Plan Work?

chapter 13 payment plan

There are different types of bankruptcy provided by the bankruptcy law. For personal bankruptcy, Chapter 7 and Chapter 13 are the usual bankruptcy options. Chapter 7 filers are interested in liquidation, whereas those who file for bankruptcy under Chapter 13 are after debt repayment.

Chapter 13 bankruptcy, known as the “Wage Earner Bankruptcy”, is designed for those individuals who are able to repay a portion of their debts over time. They can pay their debts in a Chapter 13 debt reorganization plan. Most individuals who seek bankruptcy protection under this bankruptcy chapter of the U.S. Bankruptcy Code are debtors who:

  • Own nonexempt property under Chapter 7 and, thus, prefer a longer list of bankruptcy exemptions;
  • Have a past due balance on a mortgage or car loan and wish to pay all those missed monthly payments over time without fear of foreclosure or repossession;
  • Have debts such as student loans that are not dischargeable in a Chapter 7 bankruptcy case; or
  • Have Disposable Income (as it’s defined by the bankruptcy laws) sufficient to pay back a portion of their debts over a three year period of time (this period is five years for people who do not qualify for Chapter 7).

Chapter 13 bankruptcy proceedings give you the opportunity to catch up on past due car loan, rent, and mortgage payments. In addition, if you pay your debts through the Chapter 13 bankruptcy process, you are given a predictable repayment plan that your creditors are required to accept. The major difference between Chapter 13 bankruptcy cases and debt consolidation programs is that Chapter 13 bankruptcy filings give you automatic stay to protect yourself from continued interest, late fees, and credit harassment from collection agencies and other debt collectors.

Contact a Bankruptcy Lawyer about Your Chapter 13 Payment Plan

If you’re experiencing financial distress and want to get out of debt, your first step should be to seek legal advice from a bankruptcy attorney. Northwest Debt Relief Law Firm bankruptcy attorneys can help you determine the right solution for your financial problems. If filing a bankruptcy petition is the best answer, they can teach you how to file with the bankruptcy court, guide you in accomplishing bankruptcy forms and gathering required bankruptcy information, as well as help you through every step of the way, from filing to bankruptcy discharge, and even after bankruptcy.

If you’re interested in a reorganization, our experienced Oregon and Washington bankruptcy lawyers can explain and help you put together a proper Chapter 13 Plan to ensure that it is a successful one. Call us for a free legal consultation.