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The Wage Earners’ Plan: Who’s Qualified?

What is the “wage earners’ plan” and who qualifies? In bankruptcy, a Chapter 13 allows an individual who earns regular income to reorganize financial obligations to repay over a period of time. The debtor submits a proposal for a repayment plan that is made in installments. The repayment plan is based on each person’s individual circumstances and may involve paying some debts in full and partial amounts of other debts, depending on the type of debts and your income. 

When you file for Chapter 13 bankruptcy and qualify, a trustee takes receipt of payments and distributes them to creditors. Chapter 13 bankruptcies usually span over three to five years depending on the financial circumstances of the individual debtor. 

Chapter 13 Bankruptcy

The reason that a Chapter 13 bankruptcy was previously referred to as a wage earners’ plan is because only those individuals earning a regular wage qualified. The definition was expanded to include any debtor earning an income as an individual through a regular wage, as a self-employed person or operating an incorporated business. 

Other qualifications for Chapter 13 bankruptcy include any individual with unsecured debts of less than $419,275, and secured debts are less than $1,257,850, as of this writing. Debtors must also receive credit counseling within the 180 prior to filing for a Chapter 13 bankruptcy. Partnerships and corporations may not seek financial reorganization through a Chapter 13 bankruptcy. 

Wage Earner Plan vs. Chapter 7

If you are struggling with personal debt, you may consider filing a Chapter 13 or Chapter 7 bankruptcy. A Chapter 7 bankruptcy deals with the liquidation of debt, where the debtor’s nonexempt assets are sold off to repay creditors. With a Chapter 13 bankruptcy, the debtor can keep property while continuing to pay debt off through a repayment plan. 

There are numerous advantages of a Chapter 13 bankruptcy over Chapter 7. For many debtors, saving their home is the top priority and Chapter 13 makes this possible by providing a payment plan to catch on past due house payments. In a Chapter 13, you may be able to reschedule secure debts other than the mortgage on a main residence. This allows debtors to stretch those debts over the span of the repayment plan and potentially lower payments.

Wage Earners’ Plan 3-5 Year Period

The 3-5 year period for the debtor’s repayment plan is typically based on how the debtor’s earnings compare to the median income for the state for a family of the same size. With limited exceptions, creditors are not permitted to continue collection activities once a debtor has filed for Chapter 13 bankruptcy. This injunction is known as an “automatic stay,” which is in effect upon filing in most cases. 

Wage Earners’ Plan Specifics

Before deciding whether the wage earners’ plan is the right choice for addressing your debts, speak to an experienced bankruptcy lawyer in Georgia. At H. Lehman Franklin P.C., we can help you better assess your finances and available options. 

Reach out to our knowledgeable team on 912-764-9616 or email at info@hlfranklin.com to arrange a wage earners’ plan consultation. We are a firm of legal professionals that are passionate about helping our clients in Georgia break free of debt with dignity. If a Chapter 13 bankruptcy is not right for you, H. Lehman Franklin P.C. is here to help guide you through alternatives with compassion and understanding.