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Debt repayment after filing for Chapter 13 bankruptcy

When a Tennessee consumer seeks debt relief, he or she may choose bankruptcy. There are two main types of bankruptcy to consider: Chapter 7 and Chapter 13. Many choose Chapter 7 because it can be quick and easy, and virtually all debts are wiped out in a matter of months. Chapter 13 bankruptcy, on the other hand, is the better option for those who want to keep their assets, show a good faith effort in repaying debt and possibly have a better credit score in a few years. However, debtors must adhere to a strict repayment plan or see their case dismissed.

Chapter 13 bankruptcy allows a consumer to make manageable payments over a period of three to five years, depending on his or her income. The payments commence within 30 days from the bankruptcy filing. The debtor makes payments once or twice a month and a trustee designated by the court distributes the payments based on priority. Alimony and child support payments are paid first, followed by mortgages and loans. Liens and promissory notes must then be paid.

All disposable income must then be used to pay unsecured debt. This includes credit cards, overdue rent, union dues and medical bills. The debtor is not allowed to accrue more debt without consulting with the trustee.

It is important that a consumer amidst a Chapter 13 bankruptcy sticks to the plan. Child support and alimony payments are considered to be the most important bills to pay and must be paid in a timely fashion or else the bankruptcy could be dismissed. In addition, the debtor must file taxes on time. If he or she is facing financial challenges - for example, job loss, reduced income or medical issues - then he or she can request a modification to see if the court will approve it.

Source: FindLaw, "What are a Debtor's Obligations under Chapter 13?," accessed Oct. 4, 2014

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