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Understanding Chapter 13 repayment plans in Tennessee

On Behalf of | Oct 1, 2015 | Chapter 13

Like many in Tennessee who are considering bankruptcy, you may have thought about filing for Chapter 13 bankruptcy. As such, you are likely aware that doing so means you will pay back all, or a portion, of your debts through a repayment plan. At Rothschild & Ausbrooks, PLLC, people often ask us how these plans work. In this post, we will discuss how repayment plans are established, and how they are carried out.

Generally, there is not a specified amount for your debt repayment plan. Rather, the amount that you will pay each month depends on a number of factors, including where you reside, your disposable income and the types of debts that you have. The duration of your plan may also impact the amount that you will pay. Depending on your monthly income, your plan will span over a period of three or five years. According to the United States Courts, Chapter 13 repayment plans cannot specify payments be made for more than a five year period. Therefore, your payment amounts must be enough so that your secured debts are paid off in full by the end of your plan. These debts include your mortgage and auto loans.

During a Chapter 13 bankruptcy, all of your projected disposable income is to be applied towards your debts. Therefore, on top of paying off your secured debts, you may also have to pay all, or part, of your unsecured debts. At the end of your Chapter 13 plan, however, any remaining balances on your unsecured debts may be discharged. It is also important to note, your trustee will likely also take a portion of your payments for his or her fees. Typically, bankruptcy trustees charge a 10 percent commission for each payment you make.

For more information about debt reorganization, please visit our types of bankruptcies page.


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