Chapter 13 bankruptcy involves restructuring or reorganization of current debt obligations. It allows you to keep assets and create a payment plan that is affordable and manageable for your income. If you have missed mortgage and/or car payments; or, if you have received foreclosure or repossession notices, Chapter 13 bankruptcy will get you back on track. It provides an opportunity to keep your assets avoiding foreclosure or repossession, and restructure your debt payments making your debt obligations more affordable and manageable.
For those that do not qualify for a Chapter 7 bankruptcy, due to an income level above the state median or having monthly disposable income, Chapter 13 may be best for you. It enables individuals with a regular income to keep their property while repaying some or all of what is owed to creditors over time. Even if you qualify for Chapter 7, Chapter 13 may be a better option due to its particular benefits and outcomes.
Under a Chapter 13 bankruptcy, debtors propose a plan to make installments to creditors over 36 to 60 months depending on the size of your debts and your income. Instead of paying the full amount you owe, new payments will be determined by the amount you can actually afford. In return, you may keep your property. Filing Chapter 13 bankruptcy stops harassing collection efforts and can help you reorganize your financial life.
Once you restructure your debt, you can develop a repayment plan that will help you in a variety of ways. You can use the plan to get current on missed car or home payments, lower monthly payments on credit cards or unsecured personal loans, stop interest accumulation, and avoid late penalties. Similar to Chapter 7, certain debts such as – student loans, income tax deficiencies, and family support obligations – cannot be discharged but Chapter 13 allows for a way to manage these amounts in an affordable way.
Priority debts, such as taxes and court costs, are generally non-dischargeable and need to be paid in full. They may be subject to repayment benefits specified in the plan. Secured debts are those which are secured by the property as collateral (i.e. car loan) and need to be ultimately repaid in full under the Chapter 13 plan if you wish to keep such property. The benefits come from being able to repay missed payments and future payments over a longer time period. Unsecured debts, such as credit cards, medical bill, and personal loans are more likely to be discharged. However, you must commit to paying your disposable income over a specified period in order to satisfy the unsecured creditors claims. The unsecured debt does not need to be paid off in full as long as your disposable income is contributed. Outstanding debts will likely be discharged when you contribute enough of your disposable income that covers what creditors would have received under Chapter 7 bankruptcy – liquidation of assets.
If you have fallen behind on debt payments but think you can manage to fulfill those obligations through a reorganized and restructured plan, filing a Chapter 13 bankruptcy may be the most effective way to protect yourself from creditor harassment and make an affordable plan to get back on track. Call us today to schedule a free consultation.