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Understanding the Chapter 13 reorganization plan

Consumers in Pennsylvania may benefit from learning more about the steps, requirements and expectations involved with filing Chapter 13 bankruptcy. Debtors are required to submit their repayment plan within 14 days following the date that their petition is filed. The repayment plan and the periodic payment scheduled, usually monthly or weekly, must be approved by the court before it is recognized as legitimate.

The court-appointed trustee is then tasked with distributing the funds to the creditors although some may receive less than the amount stated on their claims. Creditors may file an unsecured, secured or a priority claim. Those with unsecured claims do not having any special rights to collect property or assets owned by the debtor. With secured claims, creditors may be entitled to recover certain property or collateral if the debtor is unable to repay their debt.

Creditors with priority claims may be designated a special status by bankruptcy courts, entitling them to receive the most taxes and compensation for legal fees. In order for a repayment plan to receive approval, the debtor must present a strategy that fully reimburses the creditors with priority claims. This requirement may be waived if the creditor has agreed to other terms or if the repayment pertains to an obligation of domestic support and the debtor has already contributed their total disposable income.

People who need help negotiating with creditors may benefit from contacting a bankruptcy lawyer. Legal counsel may be able to protect debtors against harassing calls from creditors or garnished wages. In addition, these lawyers may be effective in helping debtors develop a repayment plan that could be approved by a bankruptcy judge. Anyone who has specific questions about which assets or collateral may be retained in a Chapter 13 bankruptcy may also benefit from contacting a legal counsel.

Source: United States Courts, "Individual Debt Adjustment", November 12, 2014

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