As a creditor in Ohio, you benefit when debtors file for Chapter 13 bankruptcy. This puts them on a repayment plan that has potential benefits for all parties involved. For the debtor, they are able to pay off their debts.
And for you, you are able to negotiate a new repayment plan that ensures you get your money back. But what are the exact obligations that debtors owe to creditors during Chapter 13 bankruptcy?
Primary debtor obligations
Forbes discusses the obligations that debtors have toward creditors during Chapter 13 bankruptcy. First, the primary obligation of the debtor is to repay creditors. They must do so within 3 to 5 years while making either monthly or bi-monthly payments. These payments happen via payroll deduction or through a debtor’s trustee.
The pecking order of repayments
But there is a sort of hierarchy to how repayment happens. For example, priority debts come first and the debtor must pay them in full. This means you get priority if the debtor owes you alimony or child support payments. You also fall under this category if you are an employee who has had salaries, commissions or wages withheld. This also applies if the debtor did not contribute to employee benefit plans.
Secured debts that survive bankruptcy also stay current. This means a debtor must stay on top of their mortgage, personal loans, home equity loans and more. Other secured debts must also get paid in full. This includes liens of many sorts and promissory notes.
Finally, unsecured creditors get paid in an equal amount to the debtor’s non-exempt property. This includes back rent, medical bills and credit card charges.