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In previous blogs, we’ve addressed the requirements and pros and cons of Miami residents filing for Chapter 13 bankruptcy. This week’s post will review the obligations of a debtor under Chapter 13.

Debtors are responsible for filing all required documents and forms with the bankruptcy court having jurisdiction over their cases. Additionally, they have to also submit the certificate of completion from credit counseling and a repayment plan to the court. Proof of income tax filings for the last four years and a copy of the most recent return should also be provided to the court. Filing and administrative fees may be paid in as many as four installments, but the court must receive the final installment within 120 days of the bankruptcy filing or within 180 days if the court agrees to an extension. Debtors who default on payments of their filing fees can have their cases dismissed.

Debtors are legally obligated to repay their creditors according to the terms of their agreement. Payments must begin within a month of their filing under Chapter 13. The trustee holds the payments in escrow until the court affirms or denies the submitted plan. Once approved, the trustee distributes the payments to creditors. If the plan is denied, the money is returned to the debtor with administrative fees withheld.

The repayment plan prioritizes payments as indicated:

— Administrative fees paid in full

— Statutory trustee fees of 3 to 10 percent

— Attorney’s fees

— Priority debts paid in full

— Child support and alimony

— Any salary, wage or commission owed to employees

— Tax debts that are non-dischargeable

— Employee benefit plan contributions

— Secured debts not discharged that must remain current

— Mortgages

— Home equity loans

— Motorcycle, boat and car loans

— Personal loans

— Tax liens

— Judicial liens

— Statutory liens

— Promissory notes that secure personal property

On occasion, debtors need to modify their repayment plans after the bankruptcy. Legitimate reasons for modifications could include the necessity of purchasing a vehicle, decrease in income or missed payments.

Those who want to explore their legal options could consult a Miami bankruptcy attorney for advice.

Source: FindLaw, “What are a Debtor’s Obligations under Chapter 13?” Jan. 06, 2015