Boston Bankruptcy Lawyers

The Chapter 13 Repayment Plan

Once an individual files for Chapter 13 Bankruptcy, there is a big meeting with all of the creditors and the trustee to negotiate a solution that everyone can live with. It’s very similar to a debt consolidation plan that is developed by a credit counselor.

The debt repayment plan comes up with equal payments that the debtor pays to the trustee each month. Once the debtor pays the trustee, the trustee distributes the correct percentage of the payment to each of the creditors. This way, the debtor is insulated from people who may want him or her to pay them more, regardless of having agreed to the repayment plan.

Gaining Approval for a Repayment Plan

Any repayment plan that is developed must be approved by the bankruptcy court. A bankruptcy judge must review any plan that is drawn up by a credit counselor, a trustee, or a lawyer. The plan does not get to move forward without this approval.

Most courts will require that the repayment plan proposal be filed with the actual petition for bankruptcy or within fifteen days after the petition is filed.

Secured and Unsecured Debts

If a debtor wants to keep a piece of collateral securing a particular claim, such as a house or car, the plan must contain provisions that allow the holder of the secured claim receive at least the value of the collateral. If the loan was used to buy the collateral, the plan must provide for full payment of the debt, not just the value of the collateral.

To repay unsecured claims, the plan doesn't have to repay unsecured claims in full. The debtor will have to pay all projected "disposable income" over an "applicable commitment period." As long as the creditor receives as much as they would if the debtor’s assets were liquidated, the plan is ok.

Contact the Bankruptcy Lawyers of Boston

If you are considering filing for bankruptcy, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346 to discuss your case and to determine your options.