How does Chapter 13 basically work?
A Chapter 13 plan permits persons with a regular source of income to pay part or all of their debts under the protection and control of the bankruptcy court. Commencing 30 days after filing your petition and plan of repayment with the court, you generally will pay the court a fixed sum of money per month on your old debts, and pay your current monthly expenses directly to your creditors. The bankruptcy law requires that the payments you make through the plan to unsecured creditors have a value of at least what the creditors would have received if you had chosen to file a Chapter 7 case. It also requires that you make a “best effort” which generally means pay all of your disposable income (Income minus living expenses) to the Court for three years to five years. The length of the plan is determined by a calculation required by the law. As you can see, preparation and justification of your budget is very important in making a plan that will be accepted.
