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Chapter 13 bankruptcy fundamentals

The decision has finally been made and the paperwork has been filed. One Kentucky resident has come to the conclusion that a life of mounting debt is not the answer. In order to get out from under the increasing debt, this individual has filed for Chapter 13 bankruptcy. But, now that the decision has been made, the forms completed and the paperwork filed, what comes next?

With a Chapter 13 bankruptcy, the individual has an established payment plan, which must be submitted to the court for approval. Depending upon income level, the plan may be for three years or five. A five year plan is typically for those whose income is greater than the median income level for Kentucky. With this payment plan, a trustee is appointed by the court and will be responsible for making the actual payments to the individual's creditors.

The majority of an individual's debts are paid through the payment plan. The individual makes payments to the trustee on either a bi-weekly or monthly basis. However, there are some bills that generally are not a part of the plan. These may include the mortgage if it was reaffirmed, rent, utilities and other such expenses.

Once the trustee receives payment from the individual, the trustee takes his or her commission and then makes payments based upon the plan. Priority and secured creditors are paid first. Then, if there are remaining funds, unsecured creditors can be paid. The funds remaining are based upon the amount of disposable income that an individual has available once other expenses have been met.

Chapter 13 bankruptcy is the answer to many Kentucky residents' debt problems. An experienced attorney can help the individual look at the total picture and decide if this is the appropriate choice for the individual. Once this decision is made, the process of debt relief can begin.

Source:, "Chapter 13 Repayment Plan", William C. Spaulding, Accessed on May 1, 2017

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