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How long is a Chapter 13 repayment plan?

In today's economy, many Tennessee residents may be struggling with debt. In order to obtain some debt relief, you may be considering a Chapter 13 bankruptcy. Unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy requires debtors to pay back some of their debt in a repayment plan. The amount of debt that a repayment plan will require you to pay will depend on the specific types of debt that you have.

In particular, priority debts -- certain debts that are given legal priority by bankruptcy laws -- must be paid in full. Secured debt and unsecured debt, on the other hand, have different rules for repayment. Generally, secured creditors must receive at least the value of the collateral under the repayment plan. However, unsecured creditors have very few rights, but must receive at least as much as they would in a Chapter 7 bankruptcy.

You are also likely wondering -- how much time will you have to pay back these debts? The amount of time that a person has to pay under the repayment plan will depend on the person's income. A person must pay all of their disposable income to the bankruptcy trustee for the life of the plan. The plan will be three years long if you make less than Tennessee's median income for the same family size as yours. If you make more than Tennessee's median income for a family of your size per month, then the repayment plan is generally five years long.

Since the rules vary depending on the type of debt you hold and your income, you may want to get some legal advice to understand all your rights and options under the bankruptcy code, l By getting all of your questions answered, you can determine the best course of action for your circumstances.

Source: Findlaw.com, "Chapter 13: Repayment Plan and Confirmation Hearing," accessed Sept. 8, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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