Chapter 13 bankruptcy differs from Chapter 7 bankruptcy in several important ways. One of those differences relates to the bankruptcy filers’ abilities to use their own income to pay off their debts. If a Long Island resident has some disposable income to dedicate to the repayment of their debts, then they may be able to use Chapter 13 bankruptcy and its repayment plan to find financial freedom.
What is a repayment plan?
Under Chapter 13 bankruptcy, a debtor is required to file a repayment plan within a set amount of time after their file their bankruptcy case. That repayment plan includes important information, such as:
- Repayment terms for priority debts
- Repayment terms for secured debts for which the debtor wants to maintain possession of the affiliated collateral
- Repayment terms for unsecured debts if the debtor’s disposable income will allow for it.
A bankruptcy attorney can discuss these and other debt terms with their client when they meet to discuss the client’s bankruptcy options.
How long does a debtor have to pay off their repayment plan?
Before a debtor begins to repay their debts under their repayment plan, that plan must be approved by the bankruptcy court. The bankruptcy court will check to make sure that the plan satisfies the requirements of the law. Once the plan is approved, the debtor’s repayments will generally last up to 5 years to satisfy their repayment plan. The debtor will pay a trusted a fixed amount of money each month of their plan, and the trustee will distribute money to the debtor’s creditors in accordance with the plan.
This post does not provide any legal or financial advice. Individuals who are caught with debts that they cannot repay have options for seeking debt relief. Bankruptcy may serve the interests of some debtors, but not all individuals will qualify for its protections. Consultations with trusted bankruptcy law attorneys is a good way to learn more about this important legal process.