Understanding the Chapter 13 bankruptcy repayment plan in Maine

Despite having a steady source of income, family changes, health issues and changes in the economy may cause people in Maine and elsewhere to struggle financially. Should their debts become overwhelming, they may consider options such as a Chapter 13 repayment plan. In order to help determine if filing for bankruptcy is the right solution for their situations, it is important for people to understand how the repayment plan works.

The plan

The repayment plan is the crux of Chapter 13 cases. It specifies the frequency, amounts and creditors to which people will make regular installments toward paying off their priority debts in their entirety, as well as any secured debts for which they wish to maintain the associated collateral. Over the course of three or five years, those who file for Chapter 13 bankruptcy must contribute all their disposable income.

The Confirmation hearing

Before Chapter 13 cases are approved, the court holds a confirmation hearing. At this time, a judge considers the efficacy of the plan and whether it meets the federal standards. If the court confirms the petition, filers' court-appointed trustees will begin disbursing the funds in accordance with the plan as soon as possible. Should the court decline to confirm the plan, people's cases may be converted into Chapter 7 filings or dismissed, or they may be asked to submit modified proposals.

Dischargeable debts

Upon completing all the payments under their Chapter 13 plans, people may be eligible to have some their remaining debts discharged. Provided they meet certain requirements, filers' may be released of their liability for debts disallowed or provided for by the plan. This may include credit card debt, some personal loans and medical bills. Unlike other bankruptcy options, Chapter 13 cases may also discharge people's debts resulting from some divorce settlements, separations proceedings, and judgements for malicious and willful property damage.

Missed payments

Whether their cases have yet been approved or not, people must begin making the payments in accordance with their plans to their court-appointed trustees within 20 days of filing their petitions. They may make these payments through a payroll deduction or directly. Should they miss an installment, it may result in a dismissal of their petitions. In other cases, the court may choose to convert their filings to Chapter 7 bankruptcies.

Achieving a fresh start

When personal or professional issues result in the build-up of debts for people in Maine and throughout the U.S., they may consider filing for Chapter 13 bankruptcy, among other debt relief options. Navigating the legal system on their own, however, may only add to their stresses during an already difficult time. Thus, those who are struggling with sizeable amounts of debt may benefit from seeking legal assistance.