If you have a regular income but still find yourself struggling with debt in Virginia, you may have considered options such as filing for Chapter 13 bankruptcy. While it may provide a path for regaining control of your finances, filing for Chapter 13 is a big step that comes with specific obligations. Therefore, you should understand how the repayment plan works before seeking this type of debt relief.
According to the U.S. Courts, your Chapter 13 repayment plan must provide for installments to be made to your creditors for three years. The fixed amounts specified in your plan will be regularly, usually monthly or biweekly, to the bankruptcy trustee assigned to your case for the duration of the plan. The court may approve a plan that stretches over up to five years under certain circumstances.
Once confirmed by the court, your repayment plan is legally binding. Therefore, failing to follow through with the required payments may result in your case getting dismissed or converted into a Chapter 7 claim.
Whether your plan has yet been approved or not, you must begin making payments to your bankruptcy trustee in accordance with its stipulations within 30 days of filing your bankruptcy petition. Upon confirmation of the plan, your trustee will begin distributing the funds to the appropriate creditors as soon as practically able.
Your Chapter 13 repayment plan must provide for the payment of all your projected disposable income over the plan period; however, it does not necessitate the repayment in full of all your outstanding debts. Through your plan, your unsecured creditors must get at least as much as they would have received through a Chapter 7 case. Your priority claims, on the other hand, must be paid in full. This includes the costs of your bankruptcy case and most tax obligations. In order to retain the associated collateral, your plan must include the repayment of at least the collateral’s value for secured claims.
The information contained in this post is not meant as legal advice. Rather, it should be considered for general purposes only.