A breakdown of Chapter 13 repayment plans

Chapter 13 bankruptcy is a versatile and flexible debt-relief tool that allows many individuals, or married couples, to achieve meaningful debt relief. While many confuse the Chapter 13 repayment plan with debt consolidation programs or similar schemes, the repayment plan allows people to reorganize their debt through a reasonable budget. Consumers are not necessarily required to repay all of their outstanding debt during the course of the plan. Many repay far less than their overall debt. Each case is unique. However, these plans require great attention to detail and sometimes complex legal guidelines. That is why working with a skilled lawyer is important.

Here is a quick overview of repayment plans.

There are specific variables to consider when creating a repayment plan, including:

  • Income: A repayment plan is meant to help individuals find debt relief. Therefore, the plan calculates the amount of disposable income that an individual earns. The calculation evaluates many factors, including household expenses and the types of debt involved. That way, the monthly payments are manageable within the means of the individual.
  • Time: Repayment plans outline when to make payments, as well as how long it will take to repay the debts. Usually, repayment plans last from three to five years. After the time outlined in the plan passes, then New Mexico bankruptcy courts could discharge many remaining debts.
  • Good faith: The agreement must be legal and made in good faith. That means that individuals agree to do their best to repay their obligations under the plan within the time limit. 

Repayment plans are individualized. So, these details may vary. However, all three of these elements are necessary to develop a realistic plan that pays debts incrementally instead of all at once.

What debts a repayment plan includes

A repayment plan can provide strategies to help repay various kinds of debts. The common types of debts included in such a plan are:

  • Priority debts, such as missed child support or tax debts
  • Secured debts, including mortgages or property loans
  • Unsecured debts, such as credit card bills

While repaying these debts, most people will not have to surrender their assets or property. That is one of the benefits of filing Chapter 13 and following a repayment plan. The process allows many people to protect property. For instance, a homeowner may be able to make up past due mortgage payments during the course of the process.

Understanding the aspects of a plan can give individuals essential information when considering bankruptcy. With so many myths about bankruptcy in the public forum, it is essential to speak with an attorney who can analyze your unique circumstances and explain the debt relief options that may be available to you.

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