What are bankruptcy payments?

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Written by Eva Bacevice, Esq.  
Updated May 24, 2019

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The answer to this depends on what you are asking. If you are asking about costs associated with filing a bankruptcy then the answer is the court filing fees and the costs associated with the mandatory debtor education courses. Most likely, however, you are referring to payments you make in a chapter 13 case. In this article we will go over traditional bankruptcy costs as well as chapter 13 plan payments in greater detail.

  • Bankruptcy costs

  • What is the chapter 13 plan?

  • Chapter 13 plan payment - what is included?

Bankruptcy costs

There are general costs associated with any bankruptcy case. There are fees set by the court to file your bankruptcy paperwork and start your case. Chapter 7 filing fees are currently $335 and chapter 13 filing fees are $310.

You also will need to pay for the required debtor education courses. Costs can vary depending on which credit counseling provider you use, but generally speaking reasonable fees for both courses should be less than $50.

The above costs are a part of every bankruptcy filing (although if you cannot afford those fees there may be relief available), but more than likely when someone refers to “bankruptcy payments” they are referring to chapter 13 plan payments.

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Chapter 13 Plan

A chapter 13 bankruptcy often called a “reorganization” or a “wage earners” bankruptcy, wherein you pay back some or all of the debts you owe to your creditor over a specific period of time (three to five years) through a chapter 13 plan.

There are a number of factors that go into the length of the chapter 13 plan, just be aware that three years is the minimum. Similarly, five years is the maximum.

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Chapter 13 plan payment - what is included?

In a chapter 13 plan, you will be required to repay some or all of your creditors at a rate approved by the court.

There are certain expenses that are always included in a chapter 13 plan. First, any administrative fees (usually your attorney and trustee fees) are built into your plan. This can be helpful as many people are unable to pay an attorney the full amount they charge up front.

In a chapter 13 plan, different types of debt are treated differently. If you are behind on a secured debt like your house or your car, that you want to keep, both the ongoing monthly payment and any arrearage can be included in your chapter 13 plan so that you are only making one monthly payment to your trustee. This means that for the length of your chapter 13 bankruptcy, you will not pay these bills directly - the money will go to your chapter 13 Trustee (usually through a wage payment order), and the trustee will be responsible for distributing your monthly payments to your creditors.

You must also include certain priority debts in your chapter 13 plan. These debts, and certain other non-dischargeable debts (both ongoing and past-due payments) can be paid through the plan.

Additionally, you will likely be required to pay a portion or all of your unsecured debts. Even if you are in a 100% chapter 13 plan, you will save in the long run as there will be no more late fees or interest accruing during the plan.

Your trustee will distribute your monthly payment in a certain order, starting with administrative fees, secured and priority debts. Unsecured creditors may well have to wait until closer to the end of the plan to receive their portion.

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Conclusion

Bankruptcy payments generally refer to a person’s chapter 13 plan payments. This payment plan provides relief to those filing. They’ll be able to get caught up on past-due payments without having to worry about continuing to incur late fees or higher interest charges.

The plan payments are administered by the chapter 13 trustee who will be monitoring your case until completion. So long as you are complying with the terms of your chapter 13 plan, by the end of your plan, all of the payments will have been dispersed to your creditors and you will be back on financial track after receiving your discharge.

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