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If you’ve read this blog in the past, you’ll know that there are several differences between Chapter 7 and Chapter 13 bankruptcies. The biggest difference is that a Chapter 7 plan gets rid of all debts but lets creditors take some property while Chapter 13 allows you to keep everything in exchange for a payment plan.

So what does a payment plan look like in a Chapter 13 bankruptcy? You and your attorney will look at your financial situation and draw up a plan that includes regular payments to your creditors, usually every month or twice a month. There will be a confirmation hearing where a judge will rule on the plan and decide two things: whether it’s feasible for the debtor and whether it works for the creditors.

There are three types of claims the creditors may make on the debt:

  • Priority claims are given special status. These include debts like taxes and the fees paid to the court for the bankruptcy itself.
  • Secured claims allow creditors to reclaim some property if the debtor fails to make the timely payments that the plan details.
  • Unsecured claims are ones in which the creditor cannot take property as payment in the case of delinquency.

Each of these claims will need to be given special consideration and the plan will need to account for each of them. The goal is to pay at least a portion of the debt and leave the debtor with enough to lead a normal life. An attorney can sit down with you and help you formulate a repayment plan that does both.