14 Aug Chapter 13 Bankruptcy: Repayment Of Some Or All Debts Owed
Unsecured debts are often substantially reduced in Chapter 13 cases.
- Not everyone who files a Chapter 13bankruptcy repays all the debts that they owe; in fact most do not.
Chapter 13 bankruptcy is a repayment plan that allows repayment of some or all debts over a three to five year period depending on the situation of the person filing. Like Chapter 7,Chapter 13can be a tool to help reduce unsecured debts, but Chapter 13 can do several things that Chapter 7bankruptcy does not.
One factor determining how much is paid back on unsecured debts is what someone’s ability to pay is, or how much “discretionary income” you have after paying your regular and necessary living expenses.
Another reason to file for Chapter 13 bankruptcy is that it helps catch up overdue mortgage or car payments, taxes and domestic support obligations. The payments are repaid, but by spreading them out over three to five years the balance may be easier to pay. Other unsecured debts like credit cards, general loans or medicals can be greatly reduced for many people.
Under Chapter 13, you normally keep all of your property, both exempt and non-exempt, as long as you resume (or continue) making your regular payments on secured debts, and keep current under the repayment plan required by the bankruptcy laws. This plan may pay all of your debts, or just a portion; this will depend on your particular circumstances.
A repayment plan can be from three to five years, depending on how much income you earn. After finishing your payments, the balance of most of your unsecured debts are discharged.
You must have regular and ongoing income in order to be able to cover your ongoing living expenses and enough left over to make a plan payment. You must have less than $336,900 in unsecured debt (such as credit cards, signature loans, and medical bills) and less than $1,010,650 in secured debt (such as mortgages and car loans) to qualify for Chapter 13. (figures as of April 2007 adjust every few years)
Another positive factor for Chapter 13 bankruptcy is that if you have a financial set back during your plan,you may be able to modify or lower payments to your creditors and still end up with your discharge at the end of your case. Talk to your bankruptcy attorney if you are facing problems and you are in Chapter 13.
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