By: Darrell Castle
If your debt is messy and out of control, you can reorganize them through Chapter 13 bankruptcy
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What does it mean to “reorganize” your debts?
Hi, I’m Darrell Castle and I’m an attorney licensed to practice law in the state of Tennessee.
Reorganization of your debts usually means you need to seek Chapter 13 bankruptcy protection if you’re an individual. That’s normally what it means.
It means you’re having problems in 1 of 2 areas. Maybe both. You can’t pay your bills. Or you can’t pay your bills when they come due.
That is the most common Chapter 13 bankruptcy problem. You have bills, like a car payment, house note, credit card payment, maybe some medical bills and a few other odds and ends. And you have cash flow problems. You just can’t meet all those payments as they begin to come due, so things start to fall behind.
Credit cards start to get behind. Medical bills aren’t paid. Credit cards aren’t paid. And ultimately, you might evens start to miss your car payment or house payment and put those items at risk.
Reorganization simply means you reorganize those debts through Chapter 13 while you’re being protected from your creditors. By that I mean they can’t take your property while the Chapter 13 process is ongoing. So you reorganize them so that you can make the payments when they come due.
And you file a plan of repayment. That is something an experienced bankruptcy attorney will do for you. That’s the plan of repayment. And he decides in that plan – using your income and your expenses – how much you can afford to pay on things like credit card bills and medical bills, setting up a repayment if you’re behind on your house note to cover that past due amount over the life of your plan, and possibly to write down the cost of your plan of your car to what the value actually is. If you’ve owned that car for 2.5 years then you can do that.
And then – depending on your income versus your expenses – you may be able to write down credit card bills, medical bills and things like that to a level to fit what you can actually pay.
So that’s reorganization. It’s reorganizing from a jungle of a mess you can’t pay – every day or every month – into an organized fashion where you just make one payment every pay day and you can live an organized life. And when you walk out of that Chapter 13 a few years later, everything but your house note should be paid off and your house note should be current. You should be able to continue to pay your mortgage and everything should be okay. At least that’s the point of it, folks.