A Chapter 13 bankruptcy is commonly referred to as a consolidation or reorganization. It allows you to catch up on delinquent mortgage, vehicle, tax and other payments, while eliminating most other debts. You’re allowed to keep your property, but pay back all or a portion of your debts over a three to five-year period. There’s also an option available to those who have filed a chapter 7 bankruptcy sometime during the past eight years.
Advantages of Chapter 13 Plan:
How Much you have to Pay
Your bankruptcy plan must pay certain debts in full. These “priority debts” are considered significantly important, and jump to the top of the repayment list. Priority debts include wages that you owe to employees, alimony, and certain tax obligations.
Additionally, your plan must include your regular payments on secured debts, such as a mortgage or car loan, and any arrearages on these debts that may have accrued.
The plan must show that any disposable income you have left after making these required payments will go towards repaying your unsecured debts like credit card or medical bills. You don’t have to repay these debts in full (or at all, in some cases). You simply have to show that you are putting any remaining income towards them.
The Chapter 13 Process
Before you can file for bankruptcy, you must receive credit counseling from an agency approved by the United States Trustee’s office. These agencies charge fees for their services, but they must provide counseling for free or at reduced rates if you cannot afford to pay.
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Attorney Mark Eldridge
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