So your local Chapter 13 bankruptcy lawyer has advised that you file a Chapter 13 instead of a Chapter 7 bankruptcy. This type of bankruptcy allows you to reorganize and repay your debts over time through a payment plan. If you cannot qualify for Chapter 7 bankruptcy and have mostly debts that would be discharged if you could file one, the mention of Chapter 13 can be disappointing. However, Chapter 13 bankruptcy can sometimes be a better fit for people than Chapter 7, even when dealing with debts you just want to get rid of quickly.
There are three main types of debts in a Chapter 13 bankruptcy: secured debts, priority debts, and unsecured debts. In order to be able to reorganize your debts, a plan must be established which tells the bankruptcy court how you intend to pay these debts within a five-year period. Whether this potential repayment schedule can help you or not will go a long way in determining if bankruptcy is right for you. Let our Chapter 13 bankruptcy attorney help counsel you through the process of getting a fresh financial start.
Alabama Chapter 13 Bankruptcy Attorney
The first type of debt our local Birmingham bankruptcy lawyer will look at is a secured debt. These types of debts are ones in which you got a loan to purchase a big-ticket item and the seller got a note or mortgage on the property. On mortgages, our Chapter 13 bankruptcy attorney can explain how you can put the arrearage (missed payments) into a plan payment and possibly spread it out over time. You will have to continue paying your monthly mortgage payment and the Chapter 13 bankruptcy trustee can pay your back payments from your monthly plan payment.
Under certain circumstances, our Chapter 13 bankruptcy attorney can sometimes help you refinance your vehicle and lower the monthly payment. Your new car payment will be paid through the bankruptcy trustee from your monthly plan payment. Sometimes the car payment can’t be reduced in a Chapter 13 bankruptcy, so you will continue to pay the car payment yourself and not through the plan payment.
Priority debts commonly owed by a debtor are unpaid income taxes and back child support. Once you have filed all of your tax returns and establish an amount due on your taxes, your plan payment will set up the owed taxes to be paid. If you have a tax lien, then you will probably have to pay interest on that amount. If you owe back child support, your Chapter 13 bankruptcy lawyer will look at the arrearage amount and the interest amount that you owe.
Your Huntsville bankruptcy attorney will have to discuss a proposed plan with the Alabama Department of Human Resources and receive approval before your plan payment can be calculated. There are circumstances in which you do not have to pay 100% of your back child support during the Chapter 13 bankruptcy with the balance to be paid after the bankruptcy is finished but it cannot be discharged typically. You will need to discuss with your Chapter 13 bankruptcy attorney to see if you qualify for this plan payment option.
The final component of your plan payment is unsecured debt, such as credit cards, medical bills, payday loans, and signature loans. One of the great things about a Chapter 13 bankruptcy plan is that you are not always required to pay 100% of your unsecured debts. You can be required to pay from zero percent to 100% – or any amount in between. There are many factors that your Chapter 13 bankruptcy lawyer will consider in calculating the unsecured debt portion of your plan payment.
In summary, your chapter 13 bankruptcy plan payment consists of secured debts, any priority debts, and unsecured debts. Each debt is treated differently in calculating your plan payment. It isn’t as easy as dividing all of your debt by sixty months like a loan. Plan payments are very flexible, and your bankruptcy attorney in Montgomery (or wherever you live) can give you an estimate of your Chapter 13 bankruptcy plan payment at your consultation.