Chapter 13 bankruptcy is a debt relief tool that allows consumers to pay off debts through a three- to five-year repayment plan. Chapter 13 debtors make a single monthly payment to the bankruptcy trustee, who then disburses those funds to creditors. The payment amount is determined by one’s disposable income and the amount of debt being repaid. An experienced Maryland and Washington DC bankruptcy attorney can help you prepare an affordable Chapter 13 plan and take all necessary steps for the bankruptcy court to confirm the plan.
Secured Debts in Chapter 13 Bankruptcy
Generally, most secured debts must be paid in full through a Chapter 13 plan. Exceptions might include loans that you co-signed for somebody else and secured debts for which you are surrendering the collateral. Car loans, title loans and tax liens are all examples of secured debts that are typically paid in full through a Chapter 13 plan. Some secured debts may even be eligible for “cram down,” which means you pay the fair market value of the collateral instead of the balance owed.
Mortgages are usually treated differently than other secured debts. Because mortgages are long-terms debts, they are rarely paid in full through a Chapter 13 plan. You can, however, catch up past due mortgage payments through the plan. As for the mortgage payments that come due after you file Chapter 13, some bankruptcy courts require Chapter 13 debtors to make ongoing mortgage payments through the plan, while other courts allow debtors to make payments directly to the mortgage company.
A dedicated Washington DC and Maryland bankruptcy lawyer can determine which secured debts need to be included in your repayment plan, as well as the appropriate interest rate for each secured creditor.
Priority Debts in Chapter 13 Bankruptcy
Like secured debts, priority debts are usually paid in full through a Chapter 13 plan. Priority debts are non-dischargeable unsecured debts, such as back child support and certain income taxes. A qualified Washington DC and Maryland bankruptcy attorney can determine whether you have priority debts and ensure those debts are treated properly in your repayment plan.
Unsecured Debts in Chapter 13 Bankruptcy
Unsecured creditors receive a percentage of their claims, ranging anywhere from 0 to 100 percent. The dividend paid to unsecured creditors is determined by several factors, including the value of your non-exempt assets, your income and expenses and the results of the bankruptcy means test. Upon successful completion of your Chapter 13 plan, you can discharge any remaining liability for unsecured debts if you qualify for a Chapter 13 discharge.
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