What To Know About Your Bankruptcy Repayment Plan

Are you going through Chapter 13 bankruptcy, and will eventually have a repayment plan? If so, you likely have a few questions about it.

When Will You Start Making Payments?

During the bankruptcy process, you will have a repayment plan put together that is approved by a bankruptcy judge. This process is known as the confirmation process, and it can take a while. This is because a judge, the bankruptcy trustees, and even creditors must approve of this plan before it can be confirmed. Once that happens and the plan is officially approved, you'll be given a due date for that first payment. It typically happens within a month of the bankruptcy being approved.

How Will You Make Payments?

There are a couple of different ways that you can make payments towards your Chapter 13 repayment plan. A common way is to simply make regular monthly payments towards the repayment plan. You are responsible for writing the check each month, and you'll continue to make these payments for the duration of the plan. 

However, you may have been given a wage deduction order. This means that your wages will essentially be garnished with the payment taken directly out of your paycheck. While you never see the money in your bank account, you don't have to go through the hassle of making regular payments. In addition, those payments can be spread out further, with them being taken out of each paycheck. It all depends on how you were paid. 

How Is The First Payment Made?

It's important that you pay attention to that first payment and if it is made on time. A common problem that happens is that a debtor assumes that everything is taken because they have a wage deduction order. Unfortunately, it can take some time for the wage deduction order to start taking out the payment from your wages, and it can cause the debtor to miss the first payment. It may be recommended to write a check for the first payment or two until you see the wage deduction order go into effect. 

What Happens If You Fail To Make Payments?

Your debts will only be discharged once you have completed making payments to the repayment plan. If you fail to make the payments, then those debts will never be discharged. If you have a change in circumstances that causes you to not be able to afford those payments, you'll need to have a judge modify the payments through the proper legal process. Consult with a bankruptcy attorney in your area for more information.


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