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Do you understand the repayment plan for Chapter 12?

If you have filed for a Chapter 12 bankruptcy, you likely heard from your attorney about the need to file a debtor repayment plan within three months of your filing the petition for bankruptcy.

Your Chapter 12 repayment plan must establish set amounts that you pay the trustee on schedule. Once it's approved by the court, these funds then get distributed to your creditors and usually will be less than the full amount of the debt before you filed for bankruptcy.

Some debtors file their repayment plans with their petitions, but this is not necessary as long as it is filed within 90 days.

Priority claims have higher status than second-tier secured claims and the lowest ranking, unsecured claims. Priority claims may include filing costs and owed taxes.

Secured claims can be satisfied by liquidating property if the debt is not paid. It's harder for creditors to seek payment of unsecured claims from debtors.

Your repayment plan can last for three or five years and cover all priority claims. There can be some exceptions, with the permission of the creditor. In cases where support is owed, if the debtor pays all their disposable income out in a five-year plan, some allowances may be made.

If your debt includes a mortgage that would normally be paid over a much longer period of time, e.g., 15 or 30 years, if the arrearages are paid back according to the repayment schedule, the remainder of the debt may then be paid back as per the loan's original schedule of repayment.

If it all sounds confusing, it can be quite complex, especially for debtors with all three different types of debt. Your Tampa attorney can offer guidance and advice throughout the pendency of the proceedings.

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