Will Chapter 13 Bankruptcy Work for You?

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How Do You Pay Your Debts In Chapter 13 Bankruptcy?

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If you are on the verge of a financial breakdown and are considering Chapter 13 bankruptcy, it can help you to meet with a lawyer quickly to find out the details of this branch of law.  A bankruptcy lawyer can explain how Chapter 13 works and how you repay your debt through it. Here is an explanation of how you repay your debt through Chapter 13 bankruptcy to help you understand more about it.

You Create a Repayment Plan

The first step of Chapter 13 is filing the documents for the case, and the next step is creating a repayment plan. You work with a bankruptcy lawyer to create the plan, and the plan bases your debt repayment on your income, bills, and debts.

You Make Payments to the Trustee

The plan requires making payments for 36 to 60 months, depending on the case. You might make them weekly, bi-weekly, or monthly. Your plan will state the number of payments you must make and the frequency. When you make the payments, you pay the trustee. You might send a check or money order to the trustee, or the trustee might use electronic fund transfers.

The Trustee Pays Your Debts According to the Plan

Each time the trustee receives a payment, they pay your debts for you according to the plan. The plan clearly states the payment amount and how to distribute the funds. Chapter 13 plans typically require paying the priority debts first, which include mortgage loans, car payments, IRS tax payments, and court-ordered payments. These debts are the types that you must repay in full. You might have non-priority debts, too, but these are not as important as the priority debts.

The Trustee Decides What to Do About Unpaid Debts When You Complete the Case

When you make the final payment of your case, the trustee will view your balances. If you have balances on non-priority debts, the trustee might forgive them. You should not owe any past-due balances on priority debts when you complete your plan. If you do, the trustee might dismiss some of those charges, too, but it depends. The best thing you can do if you file Chapter 13 is to make every payment necessary for your case. You will receive the best outcome from the case if you do.

Do you have further questions about the repayment plan in Chapter 13? If so, meet with a bankruptcy lawyer today. 


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