Chapter 13 bankruptcy is a reorganization of debt for consumers. If a consumer files for protection under Chapter 13 of the bankruptcy code, the consumer must propose a repayment plan that details how much of your debt you can afford to pay back and how you will pay it back over the next 3 to 5 years.
In the majority of cases, all or most of your unsecured debt, like medical bills, credit cards, or pay day loans, will not be paid back through a Chapter 13 bankruptcy and any unpaid amounts will be wiped out and discharged, giving you a clean start at the end of your Chapter 13 case. Even if a large portion of your unsecured debt were required to be paid back, all repayment of unsecured debt is at 0% interest, potentially saving you thousands and ensuring every dollar you pay goes toward paying down your debt.
Chapter 13 also allows you to keep property that would otherwise be taken in a Chapter 7 case because of unexempt equity or not saved due to delinquent payments. A Chapter 7 bankruptcy does not save your home or car if you are behind on your payment. In a Chapter 13 bankruptcy, you can repay the amount you are behind or make up the payments over the 3 to 5 years that your Chapter 13 plan runs, all the while keeping your home or car.
Chapter 13 also allows what is called “cramdown,” which is the provision in the bankruptcy code that, in certain circumstances, allows you to only repay the value of the collateral of your secured loan. A good example would be if you bought a car three years ago and paid $20,000 for it; if you now owed $15,000 but the car was only worth $10,000, Chapter 13 bankruptcy would allow you to only repay $10,000 back to your loan company with the remaining $5,000 being treated as general unsecured debt, the same as a credit card balance in your plan. This important provision can save you thousands.
To determine which chapter you should file or if you should file at all, contact Garner Law for a free initial consultation. If Chapter 13 is right for you, we will file your Chapter 13 petition with no upfront attorney fee paid by you. We know that clients facing bankruptcy are often unable to come up with large sums of money. You can pay the attorney fee through your Chapter 13 plan over the 3 to 5 years that it runs.