Chapter 13 bankruptcy allows you to manage your unsecured debts by combining them into a monthly payment plan. As noted by Credit.com, your income determines your plan. It may last for as little as three years or as long as five years.
Your payments typically go toward repaying eligible creditors holding unsecured debts such as credit cards and medical bills. Once you have completed all of the payments in your plan, the court may dismiss their remaining balances.
How much may I earn to qualify for a payment plan?
The U.S. Bankruptcy Code requires individuals to have a regular income to qualify for a payment plan. Before filing for Chapter 13, you need to review your expected earnings for the next three to five years. Your income and monthly expenses may help determine an affordable payment schedule.
As noted by the Administrative Office of the U.S. Courts, if your monthly earnings fall below Kentucky’s median income, you may have a three-year plan. If you earn more than the Bluegrass State’s median income, your plan may last up to five years.
How may the court manage a sudden hardship?
If you miss a payment, your assigned Chapter 13 trustee might ask the court to dismiss your case. With a Chapter 13 bankruptcy, you must stick to the repayment schedule approved by the court. Unemployment, an emergency or an unexpected income reduction, however, may allow you to request a modification.
If a sudden financial hardship occurs, the court may approve a request to revise your plan. Overall, making on-time payments until the end of your plan may result in the court discharging the balance of your unsecured debts.