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The Chapter 13 reorganization plan process

The Chapter 13 reorganization bankruptcy process is helpful for struggling consumers considering filing for bankruptcy to understand. It is a valuable resource that allows them to reorganize their debt and repay it over a manageable period of time.

Part of the Chapter 13 bankruptcy process includes developing a detailed repayment plan which will include how much will be paid to creditors to pay down the filing party's debts. Certain debts are given priority, including taxes and child support and some others, and will be repaid before other debts. Secured debts are also given priority and after those debts are included in the repayment plan, the bankruptcy court will evaluate if the filing party has any disposable income to repay unsecured debts with.

Chapter 13 reorganization bankruptcy is best for filing parties who have a reliable source of income to repay their debts. The repayment plan will be developed with the help of the bankruptcy court and approved by the bankruptcy court. The length of the repayment plan, three to five years, depends on the filing party's average monthly income for 6 months prior to the bankruptcy filing when compared to the state's median income. If it is less than the median income for the filing party's state, a 3-year repayment plan will be proposed; if it is more than the median income for the filing party's state, a 5-year repayment plan will be proposed.

A repayment plan can help a struggling consumer get out of debt without the need to liquidate assets through a Chapter 7 bankruptcy which may be another personal bankruptcy option to consider depending on the circumstances. Struggling consumers should be aware of Chapter 13 personal bankruptcy protection as a resource to help them enjoy debt relief and understand how the repayment plan works and can help them.

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