Repayment plan is a critical component of Chapter 13 bankruptcy

Individual debtors in California often choose between Chapter 7 and Chapter 13 bankruptcy when selecting a method of taking control of their burdensome financial obligations. This post will focus on Chapter 13 bankruptcy and one of its most important components: the repayment plan.

When a debtor files for Chapter 13 bankruptcy they must also provide the court with a plan for repaying their creditors. That plan may be filed with the debtor's petition for bankruptcy protections; if it is not filed at that time it must be filed within fifteen days of the petition's filing.

Repayment plans must lay out how a debtor will be able to provide regular payments to their bankruptcy creditor for the satisfaction of their debts. Through a repayment plan a debtor must satisfy all loans and obligations to priority creditors and may include plans to repay secured and unsecured creditors. A debtor's disposable income will be put toward the latter two types of creditors while priority creditors must be addressed in the repayment plan.

Once a debtor has filed their repayment plan they must have a hearing on its feasibility within forty-five days. Creditors may object to the repayment plan or accept its terms. Once a repayment plan is confirmed it will become legally binding upon the debtor and they will be responsible for fulfilling its terms.

It can be difficult for a debtor to imagine a way in which they may be able to pay off their creditors. However, the supportive assistance of a bankruptcy attorney can make an incredible difference in a debtor's ability to recognize their obligations, budget their income and create a repayment plan that carries them into financial freedom.