Chapter 13 payment plans

Colorado residents with unmanageable financial situations might choose to file a Chapter 13 bankruptcy for one of two reasons: They earn too much to pass the Chapter 7 means test or they wish to protect their home or other assets. The Chapter 13 process involves submitting a plan to the court that lays out how the petitioner intends to pay back their debts over a period of either three or five years. If the plan is approved by a bankruptcy judge and all of the payments are made in a timely manner, any remaining debts may be discharged.

Chapter 13 payment plans

An individual who pursues Chapter 13 bankruptcy is expected to submit a repayment plan within 14 days of filing their petition. If they are unable to meet this deadline, they can ask the court for more time. After their plan is submitted, it is reviewed by the judge handling the case and might be challenged by creditors. The length of the payment plan is determined by the petitioner’s income. Those who earn below the median income in Colorado make payments for three years. Petitioners who earn equal to or more than the median income make payments for five years.

Chapter 13 debts

There are three types of debt included in Chapter 13 payment plans. Unpaid taxes, bankruptcy fees and spousal or child support obligations are considered priority debts and must be paid in full. When debts are secured by a home, car or other assets, the petitioner may be required to repay the value of the collateral or pay off the loans. This can be difficult to do in only three to five years, which is why most people who file Chapter 13 bankruptcies do not include their real estate debt and continue to make their monthly mortgage payments. Unsecured debts like medical and credit card bills are given the lowest priority.

Exploring all options

Before filing a Chapter 13 bankruptcy in Colorado, it may be wise to speak with an experienced debt relief attorney to make sure that a Chapter 7 petition would not make more sense. This is because most people who file bankruptcies are able to pass the Chapter 7 means test, and Colorado has generous bankruptcy exemptions that protect home and automobile equity, retirement savings and personal property.