The decision to file for bankruptcy is never easy. People who are months behind in car payments, mortgage payments, owe back taxes, or other, similar financial hardships may find that filing for Chapter 13 bankruptcy is the best way to catch up on these problems, reorganize debt, and get a clean start. We are lawyers in Athens who can help you determine if Chapter 13 is the best way for you to move forward.

Chapter 13 bankruptcy is designed to let the person who files keep all of their property with the understanding that they will pay back at least some of the debt over a three to five year period. Other benefits of Chapter 13 is the potential to “cram down.” or reduce the principal owed on a car loan so that the money owed is no longer greater than the car’s value; and also “lien stripping” in which a second mortgage is removed from a house.

In a Chapter 13 bankruptcy, as your attorneys, we will help you propose a payback plan for your creditors. You, as the debtor, will make monthly payments to a bankruptcy trustee who then pays your creditors. Before you begin to repay the debt, the bankruptcy plan will detail how much of the debt you will be obligated to pay.

Which Debts and How Much Will Be Paid?

Some debts that you owe will be paid in full because they will be “priority” debts. There is generally a plan length of time designated, and it is possible that a creditor will allow the debtor to pay part of the debt during the plan period, and then owe the rest of the debt after the plan ends. In most instances, the debts that receive the highest priority include child support, alimony and some taxes.

Do You Have to Pay Off All Loans

The debtor can choose to surrender their house or vehicles in a Chapter 13 bankruptcy without making any other payments. If the debtor chooses to keep their house, they must pay all money they are behind, or their arrearages by the end date of the plan. They must also remain current and not fall further behind the in the money they owe. The same types of arrangements are generally made for vehicles if you were to keep them during the bankruptcy.

Credit card bills and medical bills are considered to be non-priority unsecured debt. That means they do not have to be paid in full in a bankruptcy. These kinds of debts are lumped together and creditors get a percentage of what they are owed, but this will be determined after the secured debts have been determined.

What about After?

When you have finished the payments set forth in the plan, then priority debts have been paid off. The non-secured portion of the debt will be paid a part of what they are owed based on the percentage that was specified in the plan, and then the remaining debt is removed from your personal liability. If you have questions about whether your situation best fits a Chapter 13 bankruptcy, contact Morgan & Morgan for help.

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