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The repayment plan is at the heart of a Chapter 13 bankruptcy

When Texas residents find themselves in a precarious financial position, they have numerous options for debt relief, depending on their overall circumstances. One option available to many is the filing of a Chapter 13 bankruptcy. Before embarking on this debt relief path, it might help to better understand the role of the repayment plan in this process.

Unlike a Chapter 7 bankruptcy, a Chapter 13 gives the filer time to repay debts on a certain schedule. Unsecured debts remaining at the end of that period could be discharged by the court. Individuals often do not have to worry about giving up property and can emerge from the process in a better financial position.

The filer is responsible for submitting a repayment plan to the court for approval. If approved, payments begin and must be made in order to continue receiving the protections provided by bankruptcy laws. The plan restructures a person's debt much like a consolidation loan. Payments are made to the trustee on a monthly or bi-monthly basis. The trustee then distributes those monies in accordance with the plan.

Debts are separated into categories for payment. Some are given higher priority. For instance, a mortgage loan would take priority over credit card debt since the filer's home secures the mortgage loan. Then some debts take priority such as back taxes.

Identifying the best way to structure a repayment plan for a Chapter 13 bankruptcy is not always an easy task. Understanding the order of debts to be paid requires knowledge of the applicable parts of the law. In order to increase the odds of receiving approval of a plan, it would help to consult with an experienced Texas attorney who can help get a person back on the right financial track as quickly as possible.

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