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The Chapter 13 Plan

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The Chapter 13 Plan

A Chapter 13 Bankruptcy filing requires the debtor to file a repayment plan for court approval with the petition or within 15 days after the petition is filed.  The plan must provide for payments of fixed amounts to an appointed trustee on a regular basis, typically biweekly or monthly.  In a Chapter 13 case the trustee distributes the funds to creditors according to the terms set forth in the plan. Debtors may offer creditors less than full payment on their claims.  There are three types of claims:

Pennsylvania PA Employment Law Help Center(sm)Priority Claims - Claims granted special status under the U.S. Bankruptcy Code, such as most taxes and the costs of bankruptcy proceeding.
Pennsylvania PA Employment Law Help Center(sm)Secured Claim - Claims for which a creditor has the right to repossess certain property pledged as collateral if the debtor does not pay the debt.
Pennsylvania PA Employment Law Help Center(sm)Unsecured Claim - Claims for which a creditor has no special rights to collect against particular property owned by the debtor.

Generally the plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim.  Debtor's can keep the collateral securing a particular claim
if the plan provides payment of at least the value of the
collateral and the full payment of the underlying debt, if the debt is greater than the value of the collateral due to depreciation.

Payments to certain secured creditors may be made over the original loan repayment schedule, which may be longer than the plan, so long as any arrearage is made up during the plan.

The plan does not need to provide for the full payment of unsecured claims as long as the debtor will pay all projected disposable income over the commitment period and as long as the unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under a chapter 7 bankruptcy filing.

The debtor must start making plan payments to the trustee within 30 days after filing the petition, even if the plan has not yet been approved by the court.  No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the U.S. Bankruptcy Code.  If the court confirms the plan, the chapter 13 trustee will distribute the funds received to the creditors.  If the court does not confirm the plan, the debtor may file a modified plan or convert the case to a liquidation case under chapter 7 bankruptcy.

Once the court confirms the chapter 13 plan, the
debtor must make regular payments to the trustee either directly or through a payroll deduction.  The plan entitles the debtor to retain property as long as payments are made.  During the plan the debtor may not incur new debt without consulting the trustee, since additional debt could compromise the debtor's ability to successfully complete the plan.

Where can I get legal advice about my Bankruptcy issue or case?

If you have a Bankruptcy Law issue or case and want legal advice for your specific situation, call the law firm below to schedule an initial consultation. 

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