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Who is involved in a repayment plan under Chapter 13 bankruptcy?

Several parties may be involved when a Tennessee resident chooses to submit a repayment plan under a Chapter 13 bankruptcy filing. The debtor, of course, must commit to providing periodic payments toward the satisfaction of the person's full or reduced debts. The debtor's creditors must be prepared to accept those payments and apply them toward the amounts they agreed to accept during the bankruptcy process. However, there is often a middle man, called a trustee, who handles the passage of payments from debtor to creditors in the Chapter 13 bankruptcy process.

After a debtor files for Chapter 13 bankruptcy the person must submit a repayment plan within a time period stipulated by the rules of the bankruptcy court. The court must accept that plan for it to be effective and once it is accepted a debtor may begin paying down the person's financial obligations. Generally, the debtor sends periodic payments to a bankruptcy trustee who keeps records of the payments and sends them along to the debtor's creditors in accordance with the terms of the repayment plan.

Debtors may provide funding for their repayment plans in a number of ways. Some choose to have their payments sent to their trustees through payroll deductions while others prefer to send money directly to their bankruptcy trustees. Based on the priorities and classifications of the debts the trustees will distribute the provided funds according to the rules of the bankruptcy process and the debtor's repayment plan.

The foregoing discussion of a Chapter 13 bankruptcy repayment plan is a simplification of a very complicated process. Readers of this blog should not consider the information contained herein to be specific legal advice. Rather, those with more questions about Chapter 13 bankruptcy may choose to seek out the guidance of bankruptcy professionals in their jurisdictions.

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