Bankruptcy Plan

A bankruptcy plan is specifically designed to guide the debtor on how and when to repay creditors. When you decide to file for bankruptcy because your debts have overwhelmed you, it is important that you are enlightened on the types of bankruptcies and how each works. There are various types of bankruptcy that can help you eliminate debt.

If you file under chapter 13, you will need a bankruptcy plan. This plan must be submitted for the court’s approval. It must also include the payments of specific amounts to the trustee. Priority claims under this arrangement are required to be paid in full. If it is for a secured claim, the plan must accommodate the one in possession of the claim to obtain the value of the collateral.

For an unsecured claim, the plan must show that the debtor is required to repay his creditors with his projected disposable income. This type of bankruptcy suits debtors with a steady income. After undergoing a means test, a debtor whose average is more than that of the state, files under this chapter. This way the debtor will use his disposable income to repay his creditors over a specified period of time. Under this repayment plan, the debtor gets to settle his debts via his income as opposed to selling off his assets. He is also permitted to keep all his assets despite the actual value. Chapter 13 plan gives the debtor a chance to spread out his payments.

The chapter 11 bankruptcy involves a reorganization plan that is designed for businesses. Under this bankruptcy you are expected to reorganize your business while still operating your business. You are to come up with a bankruptcy plan showing how you intend to repay your creditors. However, before the plan is implemented, the debtor gains approval of the plan by the creditors. If it meets the requirements and is accepted by the creditors, it is then given the go ahead by the court.


Mercy Maranga writes content on Finance and Debt Management. Visit her site here for more information on Finance and how to effectively Manage your debts. Bankruptcy