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How do I qualify for a Chapter 13 bankruptcy payment plan?

On Behalf of | Nov 30, 2021 | Bankruptcy

Individuals with steady income and property may file for a Chapter 13 bankruptcy. As noted by the Minnesota Attorney General’s website, Chapter 13 allows you to reorganize debts and enter into an arrangement to repay some of your unsecured creditors.

Individuals who own property may wish to consider Chapter 13 bankruptcy; the court generally does not require selling it to repay creditors. Your reorganization plan only covers your unsecured debts such as medical and credit card bills.

How do I work out a repayment plan with the court?

When filing your bankruptcy petition, you have 15 days to submit a repayment plan. You may create a schedule that meets your paycheck cycles. Once the court approves your plan, you must begin sending your payments to an assigned trustee.

By agreeing to pay about 25% of your monthly income, you could expect the trustee to then distribute those funds to your unsecured creditors. When you complete your plan, the court generally discharges the balances. You may no longer need to pay the remaining amounts owed.

How long would I need to make payments?

As described by, you could most likely expect to pay your creditors over the next three to five years on a Chapter 13 plan. Your monthly income generally determines the length of your payment arrangements.

If you currently earn less than Minnesota’s median monthly income for a household of your same size, your payment plan lasts for three years. If you earn more, however, your plan may last for five years.

Minnesota residents who own assets such as homes and businesses could qualify for a Chapter 13 bankruptcy. With a court-approved payment plan, you could keep your car, property and personal belongings while overcoming burdensome debts.