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The cornerstone or basis of a Chapter 13 bankruptcy is your Chapter 13 plan. It is also referred to as Chapter 13 repayment plan, Chapter 13 bankruptcy repayment plan, and Chapter 13 payment plan. They are all the same.
What Is A Chapter 13 Plan
Because of the emphasis on repayment and payment, we normally think that a Chapter 13 plan is just a list of which creditors that you will pay each month and how much you will pay them, but it includes and requires much more. Basically, it is a complete plan of how you will treat or deal with each of your creditors and each of your debts.
What Is Included In A Chapter 13 Plan
First, you need to be aware that some bankruptcy courts have local forms that they require that you use for your Chapter 13 plan. So, you need to check with the bankruptcy court in the district in which you live to see if you have to use their form or if you can make up your own plan.
What is actually included in a Chapter 13 bankruptcy plan will vary with each case, but most include the following:
- How much money will be paid to the Chapter 13 trustee each month and how long the payments will be made (36 months - 60 months).
- How the Chapter 13 bankruptcy trustee will disburse the monthly payments by paying some or all of these:
- Attorney fees,
- Mortgage arrearage payments,
- Secured portion of claims altered by valuation and lien avoidance,
- Other secured debts,
- Priority creditors, and
- General unsecured creditors (usually are paid a percentage of the amount that you owe them instead of being paid in full).
- Which creditors against whom you will file a motion to avoid their nonpossessory , nonpurchase-money security interest and lien in household goods.
- Which creditors against whom you will file a motion to avoid their judicial lien(s).
- Which creditors against who you will file a motion to establish the value of their lien(s).
- Which executory contract(s) and/or unexpired lease(s) will you continue to pay and which executory contract(s) and/or unexpired lease(s) will be rejected.
- Which creditors will you continue to pay directly and how much you will pay them.
As you can see, the Chapter 13 plan is very comprehensive and requires an indepth knowledge and understanding of Chapter 13 bankruptcy to complete.
How The Chapter 13 Plan Comes Into Existence
First, you look at all of your debt and creditors. You look at each debt and classify it. Is it secured or unsecured, it is a priority or nonpriority, etc. Then you look to see if you are required to pay the debt, not required to pay the debt, or if you have an option on the debt. After considering how each debt will be treated or handled, you propose a plan and make it a part of your bankruptcy petition.
Second, the bankruptcy trustee and interested creditors will review your proposed plan. At the 341 meeting of creditors, the bankruptcy trustee and creditors may ask you questions about your Chapter 13 plan. Often, the trustee will want you to make some modifications in your plan.
Third, once the Chapter 13 trustee approves your proposed plan, there will be a court hearing before a bankruptcy judge. Normally, the bankruptcy judge will approve the repayment plan without further action. However, sometimes, the bankruptcy judge will require that certain changes be made to your plan. In either case, your Chapter 13 plan must be approved or confirmed by the bankruptcy court in order for the plan to become effective.
When your plan is approved by the bankruptcy court, you and your creditors are bound by it. And you and your creditors remain bound by your plan as long as you make the payments required by your plan. Under certain circumstances, your plan may be modified after it is approved or confirmed by the bankruptcy court.
Start Paying The Chapter 13 Repayment Plan
Unfortunately, you cannot wait until after your Chapter 13 payment plan is approved or confirmed by the bankruptcy judge. Instead, within 30 days after filing your bankruptcy petition, you must begin making the monthly payments to the Chapter 13 bankruptcy trustee. You must also pay to secured creditors and lessors the monthly payments that you will be paying to them during the bankruptcy under your plan. When your plan is approved by the bankruptcy court, you just continue to pay the payments as stated in you plan.
It should be noted here that you can pay the Chapter 13 trustee directly each month or you can use payroll deductions and have the money paid to the trustee.
What Happens If You Stop Paying The Chapter 13 Trustee
If you fail to make the payments required by your Chapter 13 payment plan, as confirmed by the bankruptcy court, the bankruptcy court may either dismiss your bankruptcy or convert it to a Chapter 7 bankruptcy. Also, if you fail to pay any post-filing domestic support obligations or fail to make required tax filings during your bankruptcy, the bankruptcy court may either dismiss your bankruptcy or convert it to a Chapter 7.
What Happens When You Have Paid All Payments Per Your Plan
When you have completed all completed all of your Chapter 13 plan (made all required payments, filed all required motions, etc.) You will receive a discharge of your debts that are dischargeable. If you have secured debts, such as a home mortgage, domestic support payments, or other debts that continue after your bankruptcy, you will need to continue to pay them.
This is general information only. If you have any questions whatsoever, talk with a lawyer licensed in your state who has experience with Chapter 7 bankruptcy, Chapter 13 bankruptcy, or bankruptcy in general.
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