When learning about the Chapter 13 bankruptcy process, the debtor’s plan takes center stage. As the main plan for resolving debts, the debtor’s plan is developed to outline the specifics about which creditors will be repaid and how much the bankruptcy filer will be required to pay each month. In order to develop this plan, the court takes several financial details into account.
Behind The Plan
One of the main determining factors of the debtor’s plan is a person’s income level. Unlike Chapter 7, the income level doesn’t determine whether a person qualifies for Chapter 13, but determines how much they may be responsible for repaying under the plan. The Chapter 13 plan looks at earned wages and monies found in funds such as retirement, benefits or inheritance funds. Although these funds are rarely eligible for liquidation to satisfy debts, they do factor into the overall financial status and can exert influence over how much is repaid. That being said, any significant changes to such funds can result in a change in the monthly payment of the debtor’s plan.
A person’s debts are also used to develop the repayment plan. Not all debts are created equal in the eyes of a Chapter 13 repayment plan and some creditors may not even be included in terms of repayment. Secured debts, such as mortgages and car loans, take priority in a Chapter 13 debtor’s plan, as they have the highest risk of asset liquidation. As long as the debtor makes timely payments under the plan their assets will be safe from creditors. Unsecured debts take a backseat in the debtor’s plan and, depending on the specifics of the debt, may or may not receive repayment. However, unsecured debts that are related to taxes and back due criminal or court ordered payments will take more of a priority and be required to be repaid under the plan.