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Chapter 13 bankruptcy repayment plans

When Florida residents file for Chapter 13 bankruptcy, they must submit a repayment plan within two weeks of their petition. This plan must disclose how much the debtor will be paying to the bankruptcy trustee. Payments are generally made on a monthly or biweekly basis, and the plan lasts from three to five years in most cases. When these payments are received, they are distributed to the debtor’s creditors by the bankruptcy trustee pursuant to the terms of the plan. In a Chapter 13 bankruptcy, unsecured creditors generally receive less than the full amount owed.

The amount of the payments is based on the debtor’s earnings, and the law requires all of the debtor’s disposable income to be put toward the repayment plan. Disposable income is calculated by deducting the debtor’s reasonable and necessary expenses.

Chapter 13 plans include three types of debt. Priority debts, such as court costs and most outstanding taxes, must generally be paid in full, but debts like mortgages and car loans that are secured by collateral may be settled for less than their outstanding balances. However, creditors will usually receive at least the value of the asset in question, and they may be entitled to more if the debt concerned is recent. Creditors holding unsecured debt like credit card companies receive whatever disposable income remains after priority and secured creditors have been paid.

Those with difficult financial situations frequently choose to pursue a Chapter 13 bankruptcy because their income prevents them from filing a Chapter 7 bankruptcy or they have assets that they wish to protect. However, there are many myths surrounding personal bankruptcy, and Florida residents sometimes make this important decision based upon inaccurate information. Attorneys with experience in this area could dispel these myths and provide those with difficult financial situations the facts they require to make informed and intelligent choices.

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