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Bankruptcy May Be Your Option

Creating a Chapter 13 payment plan in Oklahoma

As we have discussed in earlier posts, one of the defining characteristics of Chapter 13 bankruptcy compared to Chapter 7 bankruptcy is the centrality of the payment plan as opposed to a focus on debt discharge. Given the payment plan's significance, it is important for any bankruptcy in Chapter 13 for the debtor and his or her attorney to fully understand how to create a plan that will be acceptable to creditors and the bankruptcy court and which will have the best chance of being fully carried out.

One key aspect of drawing up a workable payment plan is to comply with legal deadlines for its filing. Your plan must be filed with the court not later than 15 days after the filing of your Chapter 13 petition. There will also be a meeting of creditors, and a confirmation hearing that must be held within 45 days after that meeting to see if the plan meets the requirements of bankruptcy law and is workable.

The plan must also contain sufficient information, such as the amounts of payments to be made and their frequency. Making sure that the plan is comprehensive enough will go far toward avoiding problems.

 

Provided that the payment plan is proper in form and meets the filing requirements, the next important requirement is that it needs to account for the different kinds of creditor claims and handle them properly. These claims fall into three types:

 

  • Priority (taxes owed and costs associated with the bankruptcy petition itself)
  • Secured (claims for which the creditor can take back collateral securing the debt, such as a car loan or a mortgage)
  • Unsecured (debts not covered by collateral recovery rights)

 

Subject to some specific exceptions, priority claims must be paid in full under the terms of the payment plan. Payment of secured claims must provide creditors with at least the value of their collateral, and in some situations the creditor can be entitled to the full amount of the debt. Unsecured claims need not be paid in full, but require the plan to allocate all disposable income of the debtor in such a way that these creditors will receive as much or more than they would have under a Chapter 7 petition.

Creating a feasible payment plan that meets legal requirements is essential to avoid having the court dismiss the Chapter 13 petition and convert it to a Chapter 7.

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