Understanding Maryland's Chapter 13 repayment plan

 Posted on August 20, 2024 in Chapter 13 Bankruptcy

Filing for Chapter 13 bankruptcy allows you to manage your debts through a structured repayment plan. This process can provide relief if you want to reorganize your finances without liquidating assets. It can be helpful to know how this repayment plan operates.

Understanding the basics of the Chapter 13 repayment plan

When you file for Chapter 13 bankruptcy, you suggest a plan to repay all or at least a portion of your debts over three to five years. The duration of your plan depends on your average monthly income relative to the median income. You'll likely qualify for a three-year plan if your income is below the median. If it's above, a five-year plan is more typical.

Determining your payment amount

Your monthly payment under a Chapter 13 plan depends on several factors, including your disposable income, total debt, and necessary living expenses. To calculate your disposable income, subtract these expenses from your monthly income. The remaining amount represents what you can reasonably afford to pay toward your debts.

Prioritizing debts in the repayment plan

Not all debts are treated equally in a Chapter 13 repayment plan. You must pay priority debts, like child support, alimony, and certain taxes, in full. You can include secured debts, such as a mortgage or car loan, in the plan to catch up on arrears. Unsecured debts, like credit card bills, might only need to be paid partially, depending on your available income.

Court Approval and Plan Implementation

After you propose your repayment plan, the bankruptcy court in Maryland must approve it. This approval comes after a hearing where credtors can raise objections. Once approved, you start making payments to a bankruptcy trustee, who then distributes the funds to your creditors as outlined in your plan.

A Chapter 13 repayment plan offers a structured approach to managing your debts in Maryland. By adhering to the approved plan, you can systematically reduce your liabilities and move toward financial recovery.