Chapter 13 bankruptcy requires people to complete a repayment plan. Although earning a regular income, some may find themselves struggling with debt. To regain control of their finances, those in such circumstances often consider options such as filing for Chapter 13 bankruptcy.

Understanding how the Chapter 13 repayment plan works may help people determine if filing for this type of bankruptcy will best serve them and their families.

Submitting the plan

According to the U.S. Courts, Chapter 13 repayment plans must generally provide for the settlement of priority claims in full. To keep the collateral property, people should also include payment of secured claims for at least up to the value of their property in their plans.

Filers must submit proposed repayment plans within 14 days of filing their petitions. Chapter 13 plans should apply all of the filer’s projected disposable income over the repayment period, three years or five years, toward the plan.

Keeping up with the plan

Whether approved or not, within 30 days of filing for bankruptcy, people will begin making payments to their case trustees in accordance with their plans. They may choose to make payments directly or to have them automatically deducted from their paychecks. Until the plan’s completion, filers cannot take on new debts without seeking approval from their case trustees.

Discharging remaining debts

Upon completion of the payments under the plan, the court often discharges the remaining unsecured debts. According to the United States Bankruptcy Court for the Western District of Kentucky, Chapter 13 bankruptcy cases do not allow for the discharge of certain taxes, most restitution obligations and criminal fines, most student loans, and certain debts resulting from personal injury or wrongful death cases.

To receive debt relief through bankruptcy filings, people must fulfill the associated obligations, such as completing a repayment plan.