Chapter 13 bankruptcy repayment plan
By: Darrell Castle
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How much of your debt do you have to pay back if you file a Chapter 13 bankruptcy?
Hi, I’m Darrell Castle and I’m an attorney licensed to practice law in the state of Tennessee and the answer to that question is, it depends. It depends on a lot of things. Primarily, it depends on how much you can afford to pay back. It depends on what your disposable income is, and that just means you look at your expenses and your income, like a balance sheet, and look at the difference. How much more expense than income is there? And that is the percentage that you have to pay back.
For example, if you had income of $3,000/month and you had living expenses – not bills – of $2,500 a month, then $500 is your disposable income, so some kind of repayment based on that $500 is what you would have to pay back.
But that is really your unsecured debt – debt like credit cards and medical bills. But you still have your car and home and so forth.
The important thing to remember is that a Chapter 13 is a very powerful weapon because it allows you to control your creditors. Creditors can be at your door – literally. They can be posting a foreclosure notice on your door and you can file a Chapter 13 and stop that foreclosure. That protects your property from creditors.
Same with your car – the repo man might be looking for your car. He might even take your car and you can get it back through a Chapter 13 if you can file that before he has time to sell it.
So, it is a powerful weapon. When I say it can protect your property from creditors, that’s what it does. It also allows you to reduce debt.
The most important thing is that it allows you more cash flow per month. Most bill problems of the nature we’re talking about are cash flow problems. In other words, there’s not enough income to meet expenses. Chapter 13 allows you to increase cash flow by lowering your debt, consolidate your debt and amortize it, period. That’s what it does – it can put cash flow in your pocket to make life easier for you and all you have to do is make one payment each pay day and you’re clear. At the end of each payment of the Chapter 13 period, all your debts are paid off, everything, except your house. And then you’re current – you just have your ongoing mortgage and that’s it.
You have a chance to lead a debt-free life. That’s what Chapter 13 can do for you, folks.