Chapter 13 is one of the two types of bankruptcy that is available to most individuals; the other is Chapter 7.  Chapter 13 is what is commonly referred to as a “restructuring” or “wage earner” bankruptcy.  In simple terms, a person who files Chapter 13 is saying that they have some ability to repay creditors, unlike Chapter 7, but cannot repay all of their debts as they are currently situated.  In Chapter 13 your debts are reorganized into one, more affordable payment.  Secured debts on things like vehicles, furniture and other property are repaid under terms proposed by your case rather than the terms of the contract. 

For example, if you have 33 months remaining on a car note that is set at 14% interest, that debt will be restructured under a bankruptcy plan that will be from 36 to 60 months in length and the interest rate will be a bankruptcy specific interest rate that is at current no higher than 5.25% and is frequently lower than that.  Unsecured debts like credit cards or medical bills, unless required by law, typically do not receive a specific payment or percentage that they are to be paid.  Your home debt can be left out of a Chapter 13 payment if you are current on the home, otherwise it will be paid through the plan and a certain portion will be paid each month to catch up missed payments.

Typically, people who choose to file under Chapter 13 are doing so because their income mandates that they must or they are trying to reorganize their secured debt and prevent a foreclosure, repossession or garnishment.  Chapter 13 will also freeze interest and penalties on tax debts and allow you to repay them through the Chapter 13 plan.  Because most creditors receive something under Chapter 13, some creditors have a “preference” for this type of case and the law certainly has a preference for it.  One of the major thrusts of the most recent change in the law was to force more people to file under this Chapter.  Chapter 13 is extremely useful for averting foreclosures, repossessions, garnishments and tax levies.

What your specific payment would be in Chapter 13 is entirely dependant on your individual circumstances and the facts of your case.  The absolute minimum monthly payment available is around $100.00 per month for 36 months at this time but the facts and circumstances of your individual case determine your payment.  To determine your payment you must look at what you are trying to pay for and also how much disposable income you have left each month after reasonable living expenses.  Our firm has focused on this area of law for years and we can usually pinpoint very accurately what you payment will need to be to successfully complete the case.  All or most of your attorney’s fees are typically paid through your set, monthly payment.

In Chapter 13, a Trustee is appointed by the government to take your monthly payment and disburse the funds to the creditors in the order they are entitled to funding.  In addition to processing your monthly payments, the Trustee will also verify that you have completely and accurately filled out your bankruptcy paperwork as well as verifying that you have met other filing requirements.

Of course, the information contained on this website is merely general information and the facts and circumstances of your individual case may vary and to receive proper legal advice you will need to contact our office to arrange a free consultation.  You can reach us at 501.753.7400 or by email via the “Email for help” link to the left.

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