What is a Chapter 13 repayment plan?

| Feb 24, 2021 | Blog, Chapter 13 Bankruptcy |

You have a few different options when you file for bankruptcy in Ohio. Some people file for Chapter 7 bankruptcy, but they might have to give up a few of their assets to pay off their debts. If you want to keep most of your assets, Chapter 13 offers a different way to get out of debt.

How does Chapter 13 help you get out of debt?

When you file for Chapter 13, a bankruptcy attorney may help you write a repayment plan. Instead of selling off your assets to pay off your debts, you’ll write a plan to pay off your debts in the next three to five years. Once you’ve written your plan, you’ll submit it to a judge for approval.

Most repayment plans have three different categories. First, you’ll have the priority debts that you must pay within the next five years. Next, you’ll have secured debts that are attached to a physical property like your house or vehicle. Finally, you’ll have unsecured debts that aren’t attached to any property. You should pay off as much debt as possible, but if you can’t pay off all your unsecured debts, the judge might discharge them in the end. This means that you’ll be off the hook for those debts.

When you file for Chapter 13, you’ll have to take a means test to determine how much time you get to pay back your debts. If your monthly income is more than the Ohio median income, you can get a five-year repayment plan. Otherwise, you’ll get a three-year repayment plan.

Do you need an attorney when you file for Chapter 13?

You could write your own repayment plan, but you might end up making mistakes that force you to rewrite your plan and submit it for re-approval. An attorney may help you write a repayment plan that follows the state bankruptcy laws. Your attorney may help you restructure your debts, figure out what you need to pay off and figure out whether you qualify for a three-year or five-year plan. Your attorney might also suggest alternatives to filing for bankruptcy.