If you are one of the thousands of Americans who are considering Chapter 13 bankruptcy, you may be wondering what will be in store for you moving forward. Specifically, you may be curious about your monthly repayment plan – something that will last around three to five years and which is based on your obligations and level of income. Let’s take a closer look at Chapter 13 repayment plans and how you can get a general idea of what your payments will be.

Priority, Secured, And Unsecured Debt

Bankruptcy law treats each type of debt differently in terms of repayment. Under Chapter 13, priority debt must be paid in full unless the creditor agrees to a different arrangement. An example of priority debt is taxes and the costs associated with administering a bankruptcy. When calculating your monthly repayment plan amount, you must include your priority debts in full.

Secured debt, which is backed by an asset such as a mortgage or car loan, typically must remain current throughout the duration of your repayment plan. If you have an arrearage, that amount generally will be added into your repayment plan and has to be repaid over the duration of the plan.

Unsecured debt is treated differently than priority and secured debt. The general rule is that the plan need not pay unsecured claims in full as long as it provides that the debtor will pay all projected disposable income over an applicable commitment period. Also, unsecured creditors must receive at least as much under the Chapter 13 repayment plan as they would receive if the debtor’s assets were liquidated under Chapter 7.

Length Of  Chapter 13 Repayment Plan

An integral part of calculating your repayment centers around the length of time that your plan will last. Typically, Chapter 13 repayment plans last anywhere from three to five years. The length of your repayment plan (also known as the commitment period) depends on your current monthly income. The applicable commitment period must be three years if your current monthly income is less than the state median for a family of the same size, and five years if your current monthly income is greater than a family of the same size. The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.

We Can Help

Planning for your possible Chapter 13 bankruptcy is a wise decision. Gathering all the information that you can before diving into the process will better prepare you for what lies ahead. The Bankruptcy Team, PLLC helps clients resolve financial dilemmas through bankruptcy, foreclosure or other legal avenues so that they can get the fresh starts that they are entitled to. If you are considering filing for bankruptcy, modifying your mortgage, or are facing unmanageable credit card or student loan debt, we are here for you. Our experienced attorneys will thoroughly review your situation and advise you about viable solutions that meet your needs. To consult with The Bankruptcy Team, PLLC, call or contact us today.