February 18, 2016

Chapter 13 bankruptcy can be a useful tool to prevent foreclosure, prevent repossession, terminate garnishments, eliminate tax debts, catch up late payments in a mortgage, or to simply regain control of your personal financial situation.  It may make it possible to reduce the interest you are paying on your vehicle, reduce your monthly car payment, or even to reduce the total amount of your loan.  In certain circumstances, the ability to stop penalties, fees, and high interest charges may be enough reason to consider a Chapter 13 bankruptcy.

Chapter 13 Plan Payments

In a Chapter 13 case, we assist you in developing a household budget, and after subtracting the monthly budgeted expenses from the total household income, the remainder is considered disposable monthly income.  All disposable monthly income must be paid to the Trustee.  The Trustee will use this money to pay debts in order of the priority by the bankruptcy code and the Chapter 13 Plan.  These payments will last somewhere between 36 and 60 months, and once the Plan is successfully completed most remaining debts are discharged.

 

Typically disposable monthly income is required to be paid into the Chapter 13 Plan. Bonuses, tax refunds, and other income not included in the original budget may need to be turned over to the Trustee.  There may be circumstances that will allow a debtor to keep these types of income, such as unexpected home or vehicle repairs.  It is important that these situations are discussed with your bankruptcy attorney before spending the money, as court approval is required to retain the funds.

Chapter 13 bankruptcy can be a great way to get your finances back on the right track, and can be flexible in certain circumstances.  Using your disposable income to resolve some of your debts, while under the protection of the bankruptcy court, can reduce the stress of collection attempts by your creditors, and controlling the interest and fees being charged makes the debts more manageable.  The budget generally allows you to maintain a reasonable standard of living, and establishes habits that help as you move forward after your bankruptcy is successfully completed.

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