Chapter 13 Bankruptcy-the Basics 2

This is the second part of the Chapter 13 Bankruptcy -the Basics article.You can also read Chapter 7 Bankruptcy – the basics.

How much I have to re pay in Chapter 13 bankruptcy?
The answer is simple: Almost all your debts. If in Chapter 7 all your debts are wipe out in Chapter 13 you must pay back all your debts and follow a repayment plan approved by the bankruptcy court.

In Chapter 13 repay plan there are certain debts that need to be fully paid. These debts are also called priority debts and they are considered very important. These debts will be on top of the repayment line. The following are considered priority debts and must be paid 100%: child support and alimony, wages you owe to employees, and certain tax obligations.

Also the repay plan must also show how you are going to pay the secure debts such as car loans or mortgage. Your repayment plan must also show how you are going to use the money you have left after you pay the priority debts. You don’t have to repay these debts in full but you have to show that you are putting any remaining income towards payment,

What is the duration of a Chapter 13 repay plan
The plan duration depends on how much money you owe and how much money you make. If in the last 6 months you made more money that the state average you will have to go for a 5 years plan.If the income is lower you may chose for a 3 year plan.
In the end it doesn’t matter if you have a 3 years or a 5 years plan. All that is matter is that you repay all your debts. Sooner the better.

What happens if you can’t make the payments?
There are situations when you cannot continue making the payments (loosing the job for example).In these cases the bankruptcy trustee has to look over your case and come with a new plan. The bankruptcy court might let you discharge some of your debts on the basis of hardship.
If the court will not admit the plan modification you can require them to dismiss the Chapter 13 bankruptcy and go for Chapter 7.

How Chapter 13 bankruptcy ends.
When you complete the repayment plan all the remaining debts will be erased. Before receiving a discharge you must prove to the bankruptcy court that you are paying the priority debts and that you received budget counseling course.