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Sticking to a Chapter 13 payment plan will pay off in the end

Bankruptcy is still a viable option for many Massachusetts residents who have a regular income but find him or herself facing serious financial challenges. As it was discussed in a recent post, many people choose Chapter 13 because their income is too high to qualify for Chapter 7.

Chapter 13 bankruptcy is known as a wage earner's bankruptcy plan. It requires the debtor to propose a payment plan for his or her creditors to be completed over three to five years. The bankruptcy court must approve the debtor's repayment plan. Once the court has given its approval, the debtor begins making monthly payments to the bankruptcy trustee, who in turn pays the creditors.

It is extremely important for the debtor to make all scheduled payments on time. The debtor has the option of making payments through payroll deductions, which can help ensure no payments are missed. If the debtor fails to make payments on time, the court can dismiss the debtor's case or convert it to a Chapter 7 liquidation.

Making the court-ordered payments on time requires some discipline. The debtor must watch his or her bank account and ensure there are enough funds available when the payments fall due. The debtor will have to stick to a budget and may have to adjust to having less disposable income than in the past. It is important to keep in mind, however, that the plan is specifically designed to make the payments affordable for the debtor.

Meeting the obligations of a Chapter 13 repayment plan will pay off in the end. Once the requirements of the plan are met, any remaining balances on debts that were provided for in the plan, or disallowed by the court, will likely be discharged.

Determining whether bankruptcy is right for is can be difficult, however, debtors can obtain the necessary information so he or she can make an informed decision regarding their financial problems. This can help ensure the debtor understands what debt relief options are available to them and his or her rights are protected.

Source:, "Chapter 13 - Bankruptcy Basics," accessed Jan. 2, 2016

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