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How does chapter 13 bankruptcy work?
How does chapter 13 bankruptcy work? I make too much money for chapter 7, but not enough to realistically repay my debts.
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Answers
Chapter 13 bankruptcy provides numerous advantages over filing for a standard chapter 7 bankruptcy. First and foremost, you do not have to worry about losing any of your property. In a chapter 13 bankruptcy case, you and your bankruptcy lawyer will put together a repayment plan based on your available income. This plan is designed to give you a way to get caught up on your debts while minimizing your monthly payments.
A Note on Credit Card Debt
Similar to a chapter 7 bankruptcy, unsecured debts such as credit cards will likely be discharged, or eliminated in part. This is great news for people who have become over extended on credit and cannot make the monthly payments.
Creating the Repayment Plan
Your lawyer will work all the legal angles to get you the lowest possible monthly payment. In most cases, the payment will only be a few hundred dollars per month, and most creditors will be paid back for pennies on the dollar owed.
The repayment plan is based in your monthly income, and takes into account cost of living expenses, rent or mortgage, and other expenses to come up with a monthly figure that you can afford. Even if the payments are much lower than what your creditors expect, the bankruptcy court will force them to accept whatever payments you and your lawyer determine are possible, so long as you show a "good faith" desire to repay the debt and stick to the plan.
The repayment plan will incorporate cram downs where possible, to reduce the principle balance on secured loans such as a car, and get the payments even lower.
A Defense to Foreclosure
If you have fallen behind on mortgage payments, chapter 13 offers a way to "cure" delinquent payments and get up to date on your mortgage. Even if the lender has already filed a foreclosure lawsuit, the bankruptcy will stop the process and your lawyer should be able to force your lender into accepting the payment as per your chapter 13 repayment plan.
For more information on how chapter 13 can help you, talk to a bankruptcy lawyer to get legal advice and your options in bankruptcy.
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Posted by Staff Writer on 23 Feb 2010
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