Chapter 13 bankruptcy is often referred to as a “wage earner’s plan.” Chapter 13 bankruptcy helps petitioners with a regular income to create a plan to pay their debt (or part of their debt). Chapter 13 bankruptcy petitioners make installment payments to the bankruptcy court through a three- to five-year repayment plan designed to manage their debt, while repaying their creditors.
If the debtor’s monthly income is lower than the state median, the bankruptcy court will typically put a three-year plan in place unless there are special circumstances.
The Chapter 13 Bankruptcy Process:
After meeting eligibility requirements and submitting the required documentation, petitioners wait for the bankruptcy court to create a repayment plan based on their income. Petitioners should make all their payments on time throughout their Chapter 13 repayment plan. At the end of the three or five-year plan, the court discharges remaining debts. In some cases, the “remaining” debt can be significant.
How Does Chapter 13 Bankruptcy Help?
Protects Your Home: During Chapter 13 bankruptcy, the petitioner’s home is under the protection of the US Bankruptcy Court, and a foreclosure is prevented.
Protects Your Car: During Chapter 13 bankruptcy, creditors are prevented from repossessing your vehicle.
Prevents Additional Interest: During Chapter 13 bankruptcy, creditors cannot charge interest on debts.
Prevents Collections: Creditors are not allowed to harass Chapter 13 Bankruptcy filers for payment. The law prohibits creditors from contacting debtors regarding repayment of a debt.
Eliminates Second & Third Mortgages: Chapter 13 bankruptcy helps convert second and third mortgages from secured debts to unsecured debts, which can help homeowners underwater on their property.
May Lower Interest Rate on Vehicle Loans: Chapter 13 bankruptcy may lower the interest rate or even the balance on your car loan. Bankruptcy law requires that petitioners only pay fair market value for a vehicle if it was purchased more than 910 days before filing. If the car was purchased less than 910 days before filing, the court allows petitioners to pay creditors no more than 2% higher than the prime interest rate on the day they filed.
The Chapter 13 Bankruptcy Repayment Plan:
During a Chapter 13 bankruptcy, the court will determine the amount petitioners need to pay each month. Priority debts are paid in full (i.e., spousal support, child support, tax debt, etc.) Secured debts receive regular payments, and unsecured debts may receive anywhere from 0-100% of the total debt they are owed depending on the amount of disposable income the petitioner has available at the end of each month.
There is no shame in turning to bankruptcy to seek a discharge of debt when unintended circumstances leave you struggling to provide for your family. Are you out of choices? Do you need help releasing your family from the chains of debt? Do you need help to save your home from foreclosure? Don’t hesitate to call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.