What is a Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is plan you and your attorney create to help you reorganize your secured debts and discharge most if not all of your unsecured debt. Secured debts are debts attached to your home, cars, tax liens, and others. Just like in a chapter 7 bankruptcy, debtors can get rid of most or all of their unsecured debts, which include credit cards, medical bills, payday loans, personal loans, old taxes, and many others.
Reorganizing means a debtor proposes a plan to the court to pay off certain debts within 3 to 5 years. Debtors often benefit from much lower interest rates on secured debts in the range of 4-5%. For example, if a debtor has a high interest auto loan at 25%, the debtor could propose a plan paying 4% interest on the loan, saving thousands of dollars in interest over the life of the bankruptcy plan.
Secured types of debt commonly included in a Chapter 13 Bankruptcy Plan are:
- Arrearages or late payments on a home
- Mobile Home Loans
- Auto loans and motorcycle loans
- Trailer loans
- Home furnishing accounts like RC Willy
- Tax liens
Priority debts commonly included in a Chapter 13 Bankruptcy Plan may be:
- State or federal taxes
- Back child support, and alimony
Chapter 13 bankruptcy provides instant and automatic protection from creditors the moment it is filed. This means all collection related garnishments, tax levies, phone calls, letters, or other creditor harassment must immediately stop upon filing pursuant to the automatic stay in section 362 of the Bankruptcy Code.
Does filing a Chapter 13 Bankruptcy Offer the Same Protection From Creditors?
Yes. The automatic stay is the same in both Chapter 7 and Chapter 13 Bankruptcy. Filing a chapter 13 case stops repossessions, foreclosures, evictions, attachments, and utility shutoffs. It offers debtors very strong protection and creditors cannot take any further action against the debtor or the property without permission from the bankruptcy court.
How Much Will My Chapter 13 Bankruptcy Payment Be Each Month?
The factors that affect your monthly payment include: your income, how much secured debt you are including in the plan, and whether you owe back taxes, child support and alimony. An experienced bankruptcy attorney at the Law Offices of Morrison + Murff can help you determine what your monthly payment will be in a Chapter 13 Bankruptcy case so you can make an informed and educated decision to determine if it is right for you. Call us today at 801-456-9933 or email us on our website.
In some chapter 13 cases where your household has income that is above the median income in Utah for your family size, you may be required to pay back a portion of their unsecured debts if the they "disposable monthly income" or if you are seeking to keep assets with value above Utah's exemptions.
What Advantages Does a Chapter 13 Case Have Over a Chapter 7?
Chapter 13 is not a liquidation, so the Trustee does not take any of your assets to pay your creditors. You keep everything you own. Some other advantages to filing a chapter 13 include:
- Chapter 13 stops foreclosure, and allows you catch up late payments on your home over time and helps gets you current again;
- Chapter 13 lets you pay your back taxes off interest free in most cases;
- In many cases, you can 'cram down' your auto loans, which means you only pay what your car is worth, and often at a much lower interest rate;
- Chapter 13 is flexible and allows you the option of later converting your case to a chapter 7 if you later wish to do so;
- Chapter 13 allows you to get bankruptcy protection even if you have already filed a Chapter 7 case previously.
How Much Does a Chapter 13 Bankruptcy Case Cost?
At Morrison + Murff, we make it easy and inexpensive to get your chapter 13 case going. We offer low cost and even zero down options depending on your circumstances.
Do I have to Pay my Debt Back in a Chapter 13 Bankruptcy?
Most people pay little to none of their unsecured debts back in a chapter 13. If you wish to keep secured items like a vehicle or trailer, you pay those amounts over the life of your plan. Experienced attorneys at Morrison + Murff will help you determine what you are required to pay as part of your chapter 13 plan. Call today or contact us on our website to schedule your free consultation.