Define: Wage-Earners Plan

A Wage-Earner’s Plan, also known as a Chapter 13 bankruptcy, is a legal process that allows individuals with regular income to create a repayment plan to pay off their debts over a period of three to five years.

Individuals who have a regular source of income and whose unsecured debts are below a certain threshold are generally eligible for a Wage-Earner’s Plan. However, there are specific criteria that must be met, and it is advisable to consult with a bankruptcy attorney to determine eligibility.

Under a Wage-Earner’s Plan, the debtor proposes a repayment plan to the bankruptcy court, outlining how they will repay their debts over the designated period. The court reviews the plan, and, if approved, the debtor makes regular payments to a trustee, who distributes the funds to creditors.

Most types of debt can be included in a wage-earner’s plan, including credit card debt, medical bills, and personal loans. However, certain debts, such as child support, alimony, and some tax obligations, cannot be discharged through this process.

Yes, one of the benefits of a wage-earner’s plan is that it can halt foreclosure or repossession proceedings. By proposing a repayment plan, the debtor can catch up on missed mortgage or car loan payments over time, preventing the loss of their property.

A wage-earner’s plan typically lasts between three and five years, depending on the debtor’s income and the amount of debt to be repaid. The court determines the duration of the plan based on the individual’s financial circumstances.

In some cases, a wage-earner’s plan can reduce the amount of debt owed. The court may approve a plan that allows the debtor to pay only a portion of their unsecured debts, with the remaining balance being discharged at the end of the plan.

Filing for a Wage-Earner’s Plan will have a negative impact on your credit score. However, it is important to note that if you are considering this option, your credit score may already be affected by missed payments or high levels of debt.

In certain circumstances, it may be possible to convert a wage-earner’s plan to a Chapter 7 bankruptcy, which involves liquidating assets to repay debts. However, this decision should be made in consultation with a bankruptcy attorney, as it depends on various factors.

Yes, a wage-earner’s plan allows individuals to keep their assets, including their house and car, as long as they continue making the required payments outlined in the repayment plan. However, it is essential to stay current on these payments to avoid potential repossession or foreclosure.