Many people fall behind on their debt payments due to situations beyond their control. If you're facing overwhelming financial difficulties for any reason, you may be able to file for Chapter 13 debt relief. This is different from filing for Chapter 7, which allows for a liquidation of your assets and a discharge of all or most of your debts. Filing for Chapter 13 is a way to restructure your debt, continue to pay it off and perhaps get some relief from certain obligations.
What kind of debts need to be paid in a Chapter 13 repayment plan?
- Secured. You must pay off your secured debts during your plan period with the exception of a mortgage that you've been making regular payments on. Other types of secured debts include back taxes and automobile loans. Debts such as your mortgage are considered ongoing debts, to which you can continue to make regular payments. If you're in arrears, however, you must pay all overdue payments plus interest and fees during the Chapter 13 plan period. Similarly, if you are behind on property taxes you must pay all arrears plus interest during the plan period. The amount you will pay on your auto loans depends on whether you purchased the vehicle within the last 910 days, if you owe more than the vehicle is worth and if you have refinanced the original loan.
- Priority unsecured. These kinds of debts have not been secured with collateral such as an investment account, home or vehicle. Examples include some income taxes, spousal, child, or other obligatory support on which you have fallen behind, administrative debt related to your Chapter 13 filing and other debts the Bankruptcy Code deems a priority.
- General unsecured. These are debts such as gas and credit cards for which there is no collateral. The total amount you must pay depends upon how much disposable income you have and what is considered in the best interests of your creditors. This is measured by how much they would have received had you filed Chapter 7. You must be able to pay at least that amount.
If you don't pass a means test or the best interest of the creditors test, you will not be allowed to file for Chapter 13 debt relief. Seek experienced legal counsel for more details on how these calculations are performed and Bankruptcy or other options that may be available to you. At the Law Office of Robert C. Nisenson, L.L.C., we have helped thousands of people in debt relief matters with dedication and compassion. Call us at 732-518-8038 or toll free at 800-645-9625 for a free consultation and let us help you.