Define: Chapter 13 Plan

A Chapter 13 Plan is a legal document that outlines how a debtor will repay their debts over a period of three to five years. It is a part of the bankruptcy process and is designed to help individuals with a regular income to reorganize their debts and create a manageable repayment plan.

Under a Chapter 13 Plan, the debtor proposes a repayment plan to the bankruptcy court, which includes monthly payments to a trustee who then distributes the funds to creditors. The plan typically prioritizes secured debts, such as mortgages or car loans, and may also include provisions for unsecured debts.

No, not all individuals are eligible for a Chapter 13 Plan. To qualify, the debtor must have a regular income and their unsecured debts must be below a certain threshold. Additionally, the debtor must not have filed for Chapter 7 bankruptcy within the past four years or Chapter 13 bankruptcy within the past two years.

A Chapter 13 Plan typically lasts for three to five years, depending on the debtor’s income and the amount of debt to be repaid. The court will determine the length of the plan based on the debtor’s ability to make regular payments.

Yes, a Chapter 13 Plan can be modified under certain circumstances. If the debtor’s financial situation changes significantly during the repayment period, they may request a modification to adjust the payment amounts or extend the plan’s duration. However, any modifications must be approved by the bankruptcy court.

If a debtor fails to make payments under a Chapter 13 Plan, their case may be dismissed, and they may lose the protection of bankruptcy. Creditors can then resume collection efforts, including foreclosure or repossession, depending on the nature of the debts.

A Chapter 13 Plan can include most types of debts, including secured debts like mortgages and car loans, as well as unsecured debts like credit card debt or medical bills. However, certain debts, such as child support, alimony, or most student loans, cannot be discharged or modified through a Chapter 13 Plan.

Yes, one of the advantages of a Chapter 13 Plan is that it allows debtors to keep their property, including their home and car, as long as they continue to make the required payments under the plan. However, the debtor must also stay current on any ongoing obligations, such as mortgage or car loan payments.

In some cases, a Chapter 13 Plan can be converted to a Chapter 7 bankruptcy if the debtor’s financial circumstances change and they are no longer able to make the required payments. However, the conversion process and eligibility requirements may vary depending on the specific circumstances and the bankruptcy court’s discretion.

Obtaining credit while under a Chapter 13 Plan can be challenging, as it requires court approval. However, with the trustee’s permission, debtors may be able to obtain credit for essential expenses or emergencies. It is important to consult with the trustee and follow the proper procedures to avoid any violations of the bankruptcy laws.