Individuals in Kentucky and throughout the country who file for Chapter 13 bankruptcy have the opportunity to repay creditors over a period of three or five years. The length of their repayment plan will depend on the amount of disposable income they have. During a Chapter 13 proceeding, a debtor will have a series of obligations that must be fulfilled. For instance, an individual will need to submit a payment plan as part of a bankruptcy petition.

The first plan payment is due within 30 days of filing for Chapter 13 protection. This is true regardless of whether the plan has been approved or denied by the court. In the event that the plan is approved, payments will be transferred from the trustee overseeing the funds to creditors. If the plan is denied, payments will be returned to the debtor, and the trustee will hold back a percentage of the funds to cover administrative costs.

Debtors have an obligation to pay priority debts such as back taxes, past due child support and wages owed to employees. They must also remain current on secured debts such as home and auto loans. Any remaining disposable income will be used to pay unsecured creditors throughout the duration of the repayment plan. In some case, payment plans can be modified if there is a legitimate need to do so.

Individuals who are seeking to retain property and reorganize their debt balances may want to consider filing for Chapter 13 bankruptcy. A reorganization bankruptcy may allow a person to put a stop to creditor phone calls or letters. It may also put a temporary halt to planned lawsuits or other collection activities. An attorney may be able to further explain the potential benefits of a Chapter 13 proceeding.