What is a Chapter 13 plan?
A Chapter 13 plan is a court-approved repayment schedule that allows homeowners in bankruptcy to reorganize their debts and catch up on missed mortgage payments over a three- to five-year period.
Under Chapter 13 bankruptcy, a debtor proposes a plan to the court that restructures their financial obligations rather than liquidating assets. The plan sets out how the homeowner will repay all or part of their debts during a three- to five-year period, with a bankruptcy trustee collecting monthly payments and distributing them to creditors according to the plan's terms.
For homeowners facing foreclosure in Columbia, SC, a Chapter 13 plan can be a critical tool. When mortgage payments have fallen behind, the plan allows the debtor to "cure" those arrears-catch up on missed payments-over the plan period. This halts foreclosure proceedings and gives the homeowner time to stabilize finances while keeping their home. Unsecured debts like credit cards or medical bills may be paid at reduced amounts or not at all, depending on the debtor's income and expenses.
The plan must be feasible, showing the debtor's monthly income is sufficient to fund it, and all disposable income must go toward plan payments. Once the court approves the plan and the debtor makes all required payments, remaining eligible debts are discharged. Working with a bankruptcy attorney is essential to craft a plan that protects your home and fits your actual financial situation.