Thursday, May 25, 2017

Five Chapter 13 Bankruptcy Basics

Chapter 13 bankruptcy is a form of bankruptcy that reorganizes your debt. The reorganization is in the form of a Chapter 13 Plan, and that Plan sets forth what you are willing to pay for each debt you owe. Once the Plan is approved, you will make one monthly payment to the Chapter 13 Trustee and he or she will make payments to your lenders. Most Chapter 13 cases take 5 years to complete and once that time is up the debts you have paid through the Plan are no longer due. There are some exceptions to this rule, most notably house payments that have payments lasting longer than the 5 year bankruptcy case. In that instance, you simply continue to pay your mortgage lender.

Five other important things to know about Chapter 13 bankruptcy are:

         You can pay the value of your car rather than the balance due.
         You can pay a lower interest rate for your car instead of paying the contract rate.
         You will pay only a percentage of what you owe on unsecured debt. This means if your Plan is approved at a 1.00% repayment to unsecured creditors, you get out of paying 99% of those balances.
         Chapter 13 cases are available when the person filing has some disposable income left over each month after making payments on all of their secured debts. This determination is made after the means test calculation is made by your attorney before you file.
         A Chapter 13 will last up to five years, but you can pay off your case early if you have the ability to do so during the pendency of the matter.
It might sound like a Chapter 13 does not offer much relief, because most people do not want to be in bankruptcy for 5 years or pay back any of their unsecured debt (even a small percentage). But a Chapter 13 has many of the same benefits as a Chapter 7, most importantly that the automatic stay is in place as soon as your case is filed. Imposition of the automatic stay prevents creditors from contacting you about their debt, or maintaining a collections lawsuit against you.

If you have more questions about bankruptcy, contact us today at We will help you get prepared for what comes after we file your case, and have multiple locations where we schedule appointments.

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