How Chapter 13 Bankruptcy Works

In 2017, nearly 800,000 Americans filed bankruptcy. There two main types of bankruptcy for individuals: Chapter 7 and Chapter 13. Since many people have income that is too high to qualify for Chapter 7 bankruptcy, more and more people are seeking out Chapter 13 bankruptcy to help solve their debt problems.

Chapter 13 Repayment Plan

The crux of a Chapter 13 bankruptcy is the Chapter 13 repayment plan. The repayment plan outlines how you will pay your priority and secured debts, making fixed payments to the bankruptcy trustee biweekly or monthly. The amount of the plan payment is based on a calculation of your disposable income. In other words, the bankruptcy court will expect you to repay as much of the debt as you can afford to. A typical Chapter 13 plan lasts 60 months.

Completing Chapter 13 Bankruptcy

It is imperative that you make all of your Chapter 13 payments on time. If you default on your Chapter 13 payments, the court will dismiss your case if the default is not cured. If the court dismisses your case without discharging your debt you will be on your own again with all of your creditors. It critical to make timely payments and to keep your Stockton California bankruptcy attorney and bankruptcy trustee apprised of any changes in your situation. Keep in mind that during this period you aren’t paying your unsecured debt such as credit card or medical debt, and upon successful completion of the Chapter 13 plan, this debt will be discharged and remove your legal obligation to pay for it.