When people become overwhelmed with credit card debt, medical expenses, mortgages and other excessive costs, they may choose to file for bankruptcy as a way to end their financial turmoil. Chapter 13 bankruptcy is just one option when it comes to filing for debt relief in Texas. However, Chapter 13 allows the debtor to organize a repayment plan that allows them to pay back all or a portion of their debt to creditors. According to U.S. Courts, debtors have three to five years to make payments to the reorganization plan, and at the end of the installments, they should be relatively debt free.
The trustee who is appointed to the case will oversee the debt reorganization process and help to disperse the funds to creditors, according to the American Bar Association. Once the trustee receives the payments, he or she will allocate the funds according to which creditors have priority status. For example, debtors who are keeping their home or vehicle during a bankruptcy may have their funds placed toward the mortgage or vehicle loan before it is sent to other creditors. All of these factors may vary depending on the situation.
It is the debtor’s responsibility to give the court a list of all of his or her creditors and the amounts that are owed. The payment amounts will then be calculated based off of the debtor’s income, as well as his or her living expenses. When the Chapter 13 payment plan is created, it must be submitted to the court for approval. Often times, the plan involves the debtor paying a set amount every two weeks or every month. Debtors can either send the payments in on their own or have the funds taken directly from their paychecks.