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Wage Earner’s Plan

Formulating a Wage Earner’s Plan

The reason that Chapter 13 bankruptcy cases are known as the ‘wage earner’s’ bankruptcy is because this is the chapter of the code that’s usually chosen for relief by those who generate regular income. The reason is clear – in order for a repayment plan to be accepted by the court and the creditors involved, the debtor must show that he or she will be able to make these payments in a timely fashion. Much like a loan, this assurance is provided by proof of income.

Formulating a wage earner’s plan is an almost entirely individually-driven process. The reason is that no two financial situations are ever exactly the same, but basically, a wage earner’s plan will involve making sure that all secured creditors are paid as usual if you intend to keep the property that secures it and then proposing a regular amount of payment to unsecured creditors based on your income and your disposable income, which means any funds that are left over after your expenses have been paid. These plans typically call for a percentage of unsecured debt to be repaid over the life of the plan, but you’ll need to consult with a bankruptcy attorney to obtain an idea of what these payments will be in terms of amount.

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