Some individuals who are experiencing severe debt may be unable to repay even a portion of their debt, either because they have lost their jobs or they simply have too much debt. In this case, they may be able to file for bankruptcy under Chapter 7 of the United States Code (USC). Many others who are in severe debt may still be making a high enough monthly income and be able to make payments as long as they are affordable. These individuals should consult with a bankruptcy lawyer immediately to learn how filing for Chapter 13 bankruptcy could help them find relief from their debts.
Filing for Chapter 13 Bankruptcy
The name of this type of bankruptcy comes from Chapter 13 of USC Title 11, the title which provides the government’s laws regarding bankruptcy. Before filing under this chapter, a person must first complete a means test to find out if they are financially capable of repaying any of their debts.
If you are eligible for filing under Chapter 13, a structured repayment plan will be set up, allowing you to make affordable payments on your remaining debts over a course of three to five years, after which time your remaining debt is discharged. You will receive detailed paperwork declaring when you must make your payments, how much they should be and which creditors get paid at certain times.
This plan will also provide information regarding any property you may have as well as other pertinent aspects of your financial situation. Bankruptcy trustees as well as creditors have the right to make objections to the plan that is laid out during bankruptcy court. Ultimately it is up to the court to determine what the final end result will be for repaying your debts.
What Debts Are Eligible for the Payment Plan?
Secured Claims:
Any debts owed that are connected to some form of collateral are considered a secured claim. This means that if money is not paid to the creditor, they have the right to sell your collateral in order to pay off your outstanding debts. This can include mortgage payments, car payments and any kind of property taxes. Most of the time, the amount owed in the repayment plan includes the full cost of the debt plus any interest involved. In rare cases, you may be able to pay less than what is owed if your situation qualifies as a “cramdown.” Please speak with my firm for further information.
Unsecured Priority Claims:
In this category, it includes those debts that are not secured by collateral, but have been deemed a higher priority than other general unsecured claims by the Bankruptcy Code. Included in this group is debt from taxes, any alimony or child support that is past due as well as any additional domestic support that may be owed. Typically it is required the individuals pay off these debts in full during a Chapter 13 proceeding.
General Unsecured Claims:
These are debts that do not have priority and are not secured by any collateral. This is the portion of debt that relates to consumer goods and expenses. Credit card bills, personal loans, utilities and medical expenses are all considered typical unsecured claims. Fortunately under the provisions provided in a Chapter 13 filing, most people only end having to pay a percentage of their debts back, not the entire sum. Always check with a lawyer before making assumptions about what debts you will have to pay back or not.
Putting Forth Your “Best Effort”
Once a plan has been put into effect, it is expected that you will put forth your “best effort” to pay everything back and complete the plan. This means that any and all disposable income is put towards repaying your debts according to the standards set forth in your repayment plan. You must complete the Form 22C so that the court can determine the amount you should be paying each month to unsecured creditors based off of your income. Depending on the amount of wages you bring in annually, it could greatly affect your required payment stipulation.
Qualified Legal Assistance from a Chapter 13 Bankruptcy Attorney
The most important decision you can make when it comes to filing for bankruptcy is to hire a skilled Marietta and Cobb County bankruptcy lawyer to counsel and guide you through the process. There are many benefits to filing bankruptcy that you may miss out on without an attorney at your side, ensuring that you take all necessary steps and precautions. Get in touch with my firm today to learn how I can provide you with the representation you need. I have represented over 2,000 clients since 2006 and can help you achieve the financial freedom that you’re hoping for. Contact Cherney Law Firm LLC today, either by filling out a free case evaluation or by calling my office for a free consultation.