5 Tips for Chapter 13 Bankruptcy Repayment Plan Success

23 June 2022 by Jonathan Phillips

Are you planning to file bankruptcy using Chapter 13, or repayment plan bankruptcy? If so, you may have many questions about the repayment plan itself. Few Americans are familiar with how bankruptcy payment plans work, and they face many decisions about theirs. To help you find the right plan for your particular circumstances, here are five key tips when drafting yours.

1. Consult an Attorney

Technically, debtors may file bankruptcy without the assistance of a lawyer. However, this isn't always advisable. Making a Chapter 13 payment plan can be very complicated, involving both state and federal guidelines, the prioritization of certain debts, qualifications, and confirming secured debts (or not). Work with an attorney in your state to help guide you through these and other complex matters. 

2. Start Working Early

You may have a very limited period of time in which to decide on and draft your repayment plan. If your state has a quick deadline after filing, it's best to begin working on your repayment plan with your attorney long before actually filing. While you still need trustee approval and some things may change, you'll have a head start if you make many of the big decisions as early as possible. 

3. Consider a Longer Plan

In general, debtors may choose between a three-year repayment plan and a five-year one. If you have the option of using either, it's often a good idea to stretch out the repayment longer and make your payments smaller. While you may receive a discharge of less debt, having lower payments and a longer time frame is helpful if your financial situation changes during the plan. 

4. Be Wary of Reaffirmation

Many filers can choose to reaffirm secured debts — meaning you may keep the asset (such as a house or car) by bringing payments up to date and continuing to pay on time. However, just because you can reaffirm a debt doesn't necessarily mean you should. Consider carefully and honestly your long-term ability to pay for and maintain that asset. You don't want to have it be a cause for failure of your bankruptcy or waste money trying vainly to keep it. 

5. Automate Your Payments

Each month, you must make the appropriate payment to the trustee for distribution to creditors. Making timely payments for the entire plan period is essential to avoid the failure of the bankruptcy and get the remaining debts discharged. Automate this payment if at all possible, such as through a payroll deduction or automatic transfer, to ensure success. 

Where to Start

Ready to learn more about Chapter 13 in your state? Want more tips for success? Start by meeting with a local Chapter 13 bankruptcy attorney today. 

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