Bankruptcy terminologies are among the vital information to know before even filing for this procedure. Terms may be defined concretely or else they may mean another thing. A good example is the term plan in relation to bankruptcy.
Defining a Plan
A plan may refer to either the preparation process for bankruptcy filing. Generally, this term may refer to the actual repayment plan that a people filing for bankruptcy should submit depending on the chapter considered for filing.
Although a person may file for bankruptcy, it will be best to know other vital information first that come with bankruptcy to avoid potential issues met along the way. A bankruptcy plan will also help a person know his eligibility for different bankruptcy codes. Specific bankruptcy codes may suit special debtor profiles like Chapter 12, meant for family fishermen and farmers, Chapter 13 Bankruptcy for almost everyone, and Chapter 9 for municipal debtors.
The planning process includes consulting a bankruptcy expert to know their eligibility for specific codes. Experts will assess their financial profile to file for bankruptcy under specific chapters or if they actually need bankruptcy to fix their financial issues.
Apart from bankruptcy code eligibility, planning will also help filers in preparing their needed documents for the process. Documents include financial records, loan declaration, income records, and a lot more. Being able to prepare them before the actual filing process speeds up the process and get a person start his new life during bankruptcy.
The term plan may refer to repayment plans. These are the repayment plans proposed to pay creditors with a set timeframe. Not everyone filing for bankruptcy are eligible for repayment plans, especially for some businesses. Repayment plans often come with reorganization plans for businesses, giving them the chance to salvage their business and pay creditors in the process.
Repayment plans vary depending on bankruptcy code where people filed their accounts under. In Chapter 13, an individual can repay creditors within three to five years after filing for bankruptcy. Creditors will receive an amount according to what the debtor can afford. A repayment plan under this chapter will include the debtor’s budget, current assets, loan amounts, debt types, and projected repayment plan timeframe. The advantage of a repayment plan under this chapter is some of debtors’ assets will be exempted from being used in paying creditors and keep them for their own use.
In Chapter 11, the repayment plan is essentially the same, but it gives creditors the chance to approve or go against your proposed repayment plan. The debtor needs to fix the proposal until creditors approved of repayment and restructuring. Repayment plans in this chapter is also considered more flexible as creditors and the court may approve of longer repayment terms given the debtors’ current financial status. People who want to file bankruptcy under Chapter 13 may use Chapter 11 instead if their overall loan amount goes beyond the former’s amount limit.
The term plan may refer to a lot of things, but these two are the common definitions where it’s often used. Be sure to use the right terminology and consult a professional bankruptcy lawyer to get the best repayment and bankruptcy plan that suit your needs.