What are debtor’s obligations for Chapter 13 bankruptcy?
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What are debtor’s obligations for Chapter 13 bankruptcy?

| Nov 13, 2020 | Bankruptcy

Nevada residents like you turn to bankruptcy in difficult financial times. This tool is versatile and can help you out a lot if you are in financial distress. But if you choose to file for Chapter 13 bankruptcy, your duties do not end there. 

As a debtor, you have certain obligations under Chapter 13 bankruptcy. Knowing what they are and fulfilling them is crucial to your success. 

Your primary obligation

The United States Courts discusses the basics of Chapter 13 bankruptcy. This includes debtor’s obligations. With Chapter 13 bankruptcy, you create a 3 to 5 year repayment plan within 30 days of filing. This means you have 3 to 5 years to repay your restructured debts under this plan. 

As such, your first obligation is repaying creditors. You must do this in a certain order, too. First, you need to pay your administrative fees in full. This includes attorney fees and a statutory trust fee. This can range from 3 to 10 percent. 

Next, pay priority debts in full. These debts include things like alimony and child support. It also includes non-dischargeable tax debt and wages, salaries or commissions owed to employees. 

At the same time, you must keep on top of secured debts that survive bankruptcy. This includes home equity loans, mortgages and personal loans. 

Secondary obligations and unsecured creditors

Any other secured debts that are not priority go next. Examples include judicial liens and tax liens. Finally, you owe unsecured creditors an amount equal to your nonexempt property. These creditors typically include credit card charges, medical bills, back rent and union dues. 

Your second and final obligation is sticking to your plan. There is no second chance after Chapter 13 bankruptcy. If you fail to stick to the repayment plan, you are out of options.