What Is a Repayment Plan in Consumer Bankruptcy?
A repayment plan is an incredibly important document in consumer bankruptcy. It outlines how many months a consumer will be obligated to make payments to creditors and in what amounts. In consumer bankruptcy, a repayment plan is typically established to determine the structure of payments. Usually, it won’t cover the full amount of the debts but rather consolidates them into a combined monthly sum the consumer can afford to pay over a specified period. The repayment plan is set for a maximum of 36 months, and, if it’s determined that the debtor has led to their insolvency or significantly increased it intentionally or through gross negligence, the repayment plan can’t be shorter than 36 months or longer than 84 months.
Is a repayment plan always established?
A repayment plan is not always established in consumer bankruptcy. If it’s evident that the consumer is permanently unable to make any payments, the court can forgive the debtor’s obligations without establishing a repayment plan.
If the inability to make payments isn’t permanent, conditional forgiveness without a repayment plan is possible.
How is a repayment plan established?
The repayment plan is prepared by the trustee after the deadline for filing claims and the liquidation of assets belonging to the bankruptcy estate. The final repayment plan is determined by the court through a relevant court order.
What happens to the debts after completing the repayment plan? Completing the repayment plan as outlined in the court order is crucial because, after the debtor’s compliance with the plan’s terms, the court issues an order confirming the execution of the repayment plan and forgiving the debtor’s obligations incurred before the bankruptcy announcement and not paid due to the execution of the repayment plan. This means that the remaining unpaid obligations become forgiven, and no one can demand their repayment. This is the essence of debt relief in consumer bankruptcy.
When does the court revoke the repayment plan in consumer bankruptcy?
The debtor’s compliance with the repayment plan when seeking debt relief in consumer bankruptcy is essential because non-compliance with the obligations specified in the repayment plan may lead to its revocation. According to bankruptcy law, if the debtor fails to fulfill the obligations specified in the creditor repayment plan, the court, either ex officio or at the request of a creditor, after hearing the debtor and the creditors covered by the creditor repayment plan, revokes the creditor repayment plan unless the breach of obligations is minor or further execution of the creditor repayment plan is justified by considerations of justice or humanitarian reasons. In case of the revocation of the creditor repayment plan, the debtor’s obligations are not subject to forgiveness.
Summary
As seen from the above, compliance with the repayment plan, as a late-stage of the procedure, is crucial for obtaining debt relief in consumer bankruptcy. Evading the obligations set by the repayment plan can lead to the revocation of the plan, jeopardizing the chances of debt forgiveness.