Sometimes when a person in Vancouver falls on hard financial times, they determine that they need to file for bankruptcy. Chapter 13 bankruptcy may be attractive to those who believe that they can repay their debts given more time, as well as to those who want to try to keep certain pieces of property. However, when it comes to repaying debts under a Chapter 13 repayment plan, it is important to understand the difference between priority debts, secured debts, and unsecured debts.
When it comes to debts for bankruptcy purposes, there are priority debts, secured debts, and unsecured debts. Priority debts are treated specially by the bankruptcy code and include costs associated with the bankruptcy proceedings themselves and unpaid taxes. Secured debts are backed by collateral, which is property that can be repossessed if the debt is not paid. One example of a secured claim is an automobile. Unsecured debts are those which are not supported by collateral, such as medical debt.
In a Chapter 13 repayment plans, priority claims must be paid in full. If the individual filing for bankruptcy wishes to retain the collateral associated with a secured debt, then the creditor, through the terms of the repayment plan, must receive at a minimum the amount of money the collateral is worth. That being said, depending on when the debtor incurred the debt, it may be the case that the secured debt must be paid in full. Repayments to secured creditors may go beyond the three to five-year bankruptcy repayment plan, as long as any past due payments are paid up.
Under a Chapter 13 repayment plan, unsecured debts need not be paid in full under certain circumstances. First of all, per the plan, all the debtor's anticipated disposable income must be paid during the course of an applicable commitment period. Second, the debtor must pay as much as he or she would in a Chapter 7 plan.
In the end, determining when debts must be paid in a Chapter 13 repayment and how much must be paid is a matter best left to professionals. This post cannot serve as the basis for any bankruptcy filing. Therefore, those who wish to file for Chapter 13 bankruptcy may be well-served to contact an attorney who can advise them as to their rights throughout the bankruptcy process.