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Florida Bankruptcy Lawyer: The Chapter 13 Plan, Part 1

The most important document filed with the bankruptcy Court when pursuing Chapter 13 relief is the plan. It is the document, that once confirmed, binds all parties to the proceedings. The plan must provide for the submission of all or part of a debtors future income to the Trustee as may be necessary for the execution of the plan. A plan must pay all priority claims unless
that particular creditor agrees to different terms. It must provide for the same treatment for each claim within any particular class of claims if “classes” are designated and may provide for less than full payment of all amounts owed for a claim if all debtors disposable income is being applied to making the payments under the plan. Common classes used would normally appear as secured and unsecured creditors. Secured creditors would hold security instruments such as a mortgage, leases or other instruments demonstrating creditors rights to the property involved. Unsecured creditors would normally be credit cards, medical bills and money judgments (not based on intentional acts). Certain claims must be paid in full such as domestic support obligations.

It’s critical that the debtor have enough income to fund a plan if it will be successful.

Plans typically fail when debtors try to keep property that is simply too expensive for them to own, when unforeseen circumstances arise or when there is a drastic change in income. The Chapter 13 bankruptcy still works to protect the debtor as it is a re0organization of their finances. Motions can be made to the Court to amend the plan and adapt to the changed circumstances as the need arises. If the debtors income changes by more than $10,000.00 dollars up or down, then the plan must be changed.

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