If you enter into Chapter 13 bankruptcy, you have to repay certain debts. You likely have a lot of questions about your repayment plan. Once you have Chapter 13 bankruptcy explained to you, you will have a much better idea of how the process works. Scheduling an appointment with a bankruptcy lawyer in Glendale, AZ will get you on the right track to a fresh start.
Q: I need Chapter 13 bankruptcy explained. Are all debts treated the same with Chapter 13 bankruptcy?
If you have ever asked the question “What is Chapter 13 bankruptcy?” you have probably asked about how debts are treated as well. Debts fall into four categories with Chapter 13. You have administrative debts such as trustee fees and attorney’s fees, secured debts such as car loans and mortgages, unsecured priority debts such as taxes and child support, and unsecured debts, pretty much everything else. When you file Chapter 13 against secured debts, you provide for payment of that secured claim or the creditor can take the item used for collateral for that claim.
Unsecured priority debts are deemed more important than standard unsecured debts. Items like child support and income taxes fall into this category. They must be paid in full, though interest is not paid on these claims and penalties on tax claims are not paid in most cases.
Finally, you have unsecured debts. These are often personal loans, medical bills, and credit card debts. You usually only pay a small percentage of these debts based on your ability to pay when you file Chapter 13.
Now that you’ve had this part of Chapter 13 bankruptcy explained to you, let’s move on to the next question.
Q. For how long will I have to pay my debts?
If you make more than the state’s median monthly income, your plan must last five years, unless all allowed claims are paid in full before five years of plan payments. If you make less, your bankruptcy lawyer in Glendale, AZ will put you on a three year payment plan, unless a five year plan better serves your budget.
Q. Can I cramdown any of my debts?
You can use cramdowns to reduce the principle value on a loan so it equals the value of the property that secures it. For instance, if you owe $20,000 for a vehicle but it appraises at $15,000, and your loan is more than 910 days old, your bankruptcy lawyer in Glendale, AZ can lower the loan to $15,000. Then, you will have to pay $15,000 to keep the car. The other $5,000 does not disappear. Instead, it goes over to your general unsecured debt, meaning it might not have to be paid in full, depending on the terms of your bankruptcy. If your loan is not more than 910 days old, you can still reduce the rate of interest on that loan in most situations, saving money overall.
Q. Can I save my nonexempt assets in a Chapter 13?
Many times people file a Chapter 13 bankruptcy in order to protect an asset or assets that they would normally lose if they filed a Chapter 7 bankruptcy. Speaking with a bankruptcy lawyer in Glendale, AZ, will help you evaluate if a Chapter 13 bankruptcy is the right decision in keeping nonexempt assets.
If you have ever asked “What is Chapter 13?” it is important that you use these answers to understand the process. Then, instead of asking “What is Chapter 13?” you can start to think about how it can help you.
This blog is intended as a general discussion of legal issues and not as a statement of fact, legal advice or a legal opinion. No attorney-client relationship is created by this blog. Do not act or rely upon law-related information in this communication without seeking the advice of an attorney licensed to practice in the relevant area.