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The Chapter 13 Plan: What is it?
The Chapter 13 Plan is a mechanism in bankruptcy which makes it possible for a debtor to restructure his or her debt. The plan explains who will get paid, how much, and when. The Chapter 13 plan can include payment for many different types of creditors including secured creditors (i.e. mortgage lender or car loan), priority creditors such as a taxing entities (i.e. IRS or Kansas Department of Revenue) or domestic support obligations (i.e. child support or maintenance/alimony).
The Chapter 13 Plan lists all items that are required to be paid through the plan pursuant to the bankruptcy code as well as certain other debts the debtor opts to include in the plan such as a car payment or house payment. Upon compiling the total expenses related to all of the items that will be paid through the plan (including the Chapter 13 trustee's fees), then a sum total of all those items is calculated.
That sum total is then divided by the number of months for which the plan will run to determine what the monthly Chapter 13 plan payment will be. If the debtor is below the median income, then the bankruptcy plan may run from anywhere between 36 to 60 months, depending on what is feasible for the debtor to pay. If the debtor is above the median income, then the plan MUST run for a minimum of 60 months.