Chapter 13 bankruptcy is a court-approved payment plan to repay debt obligations. It usally spans within 3 to 5 years. Certain debts are required to be paid through this plan. This chapter is commonly filed by people who wants to keep properties such as their home or vehicle while getting caught up on payments.
In Chapter 13, certain debts have higher priority than the others. Secured debt such as mortgage or vehicle loan are included in your repayment plan. Failure to make payments in which you are facing foreclosure or repossession can be remedied by Chapter 13 which allows you to make payments you missed by repaying them overtime. As long as you make these payments according to your plan, you’ll be able to keep your property.
Back child support, spousal support or alimony and back taxes are other debts prioritized in Chapter 13 bankruptcy. When a debt is a priority in bankruptcy, it is required to be paid. In Chapter 13, unsecured debt may not be considered a priority, yet depending on the amount of disposable income you have left over you may be required to place it toward the debt. The amount you have left over after making necessary payments is called disposable income.
The discharge of unsecured debt in Chapter 13 is contingent on the required payments made by a debtor during the repayment plan period. Payments made to unsecured creditors rely on what you can afford rather than the amount of debt owed.