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What must be done to make a Chapter 13 plan work?


With a filing of Chapter 13, Texas residents need to make certain that they focus on what is important to make the plan successful. This type of filing is referred to as a "wage earner's plan." It allows those who have a regular stream of income to formulate a plan to pay back all or some of the debts they have accumulated. Installment payments will be made so the debts can be wiped out within three to five years. The amount of income the debtor earns will dictate whether it is a three or five year plan.

When the plan is formulated, its provisions will be binding for both the debtor and each creditor. When the court has confirmed the plan, it is up to the debtor to make it successful. For that, the payments must be made to the trustee in the case. This can be done directly or it can be done through payroll deduction. The latter requires the debtor to live on a fixed budget for an extended period of time. In addition, while the debtor will be able to retain the person's property as long as the payments are made once the plan is confirmed, the debtor is not allowed to garner new debt before receiving the go-ahead from the trustee. This is because more debt can harm the debtor's ability to adhere to and finish the plan.

The plan payments can be made through payroll deductions. By doing this, there is a better chance that the payments will arrive when they are due. If the debtor does not make the payments when they are due, the case could be dismissed by the court or it might be converted to a Chapter 7 liquidation. The case can also be dismissed or converted if there are domestic support payments such as child support or spousal support that are not made after the Chapter 13 has been filed. If the debtor does not make tax filings, this too can be the foundation for dismissal or conversion.

The seemingly simplest issues are often the most complicated and those who are filing for Chapter 13 might be prone to forget about them. This includes following all the necessary procedures to make a Chapter 13 work. Those who are seeking to reduce debt and make a fresh financial start with a Chapter 13 bankruptcy should speak to an experienced lawyer so all the issues linked to the process are fully understood.

Source: uscourts.gov, "Chapter 13 -- Bankruptcy Basics -- Making the Plan Work," accessed on March 22, 2016

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