Chapter 13 can be a great tool for getting out of debt. Besides being able to offer debt resolution with protection of secured debt assets, many people prefer the debt repayment option. In fact, repaying your debts in a Chapter 13 plan can put you at an advantage when looking for credit after bankruptcy.
Your Plan
When you file for Chapter 13 the court evaluates your disposable income (amount of income after your essential living expenses are deducted) against your debt obligations. The court will then determine an amount for you to pay each month to your bankruptcy trustee. The reason that Chapter 13 works is that the payment amount is based on a level that you can afford, spread out over a period of three to five years. While this may sound like a long time, many people find that their payment amounts are lower than what they were paying prior to the bankruptcy and may even be able to resolve the debt for less than what is actually owed.
In your Chapter 13 plan, you are responsible for making timely payments to your trustee, who then pays your various creditors on your behalf. Changes to your income, debts, assets or funds could have an impact on your case and its outcome.
For example, if you were to get fired from your job, have retirement or other benefit funds terminated, your payment plan could be adjusted downward to accommodate this reduction in income. On the other hand, if you were to obtain a higher paying job, inherit some money or have a boost in benefit funds, your payment plan could be increased. It is important to remember that changes in your Chapter 13 plan are always based on your unique financial situation and are designed to help you, not put you further into financial hardship.
It is important you stay in communication with your Tampa bankruptcy attorney and trustee if you have any changes to your financial situation, which could influence your payment plan.