Markham bankruptcy attorney describes Chapter 13 bankruptcy. Chapter 13 bankruptcy is a re-organization and repayments of certain debts. Chapter 13 is a payment plan that is going to allow a person to repay a portion of their unsecured debt and their secured debt. Generally speaking, the secured debt in a Chapter 13 will be paid back in full and an unsecured debt can be paid back to as little as 10% of the actual unsecured debt.
The payment plan for a Chapter 13 lasts for 36 to 60 months. That will equal to roughly 3 to 5 years. Now, this payment plan will be a once a month payment or depending upon the frequency of your income and your paychecks, depends on the frequency of the person’s paychecks will depend on the employer’s amount of time – the frequency of the person’s paycheck will determine the amount of times that the person will pay to the trustee during the one-month period. So for instance, if a person is paid every other week, then when the person receives their paycheck every other week, the trustee will take a portion of that paycheck to satisfy the payment plan for the bankruptcy Chapter 13.
For instance, if a person is in a Chapter 13 and is paying roughly $1000 per month to the trustee and is paid every other week, then that person would roughly be making a payment of $500 every other week to the trustee for the total of $1000 for the month. With a pay frequency of every other week, it is a little bit higher because that person could be getting paid more than twice in a month.
So the Chapter 13 bankruptcy process determines how much you will pay back to the creditors by what is called the means test in the bankruptcy code. The means test pretty much determines the amount of money that the person will be paying into the plan by determining what that person’s disposable income is. Disposable income generally is an income minus your expenses per month formula. So if a person can qualify for a Chapter 13, then they would determine how much your disposable income is and apply that amount per month for a time of 3 to 5 years or 36 to 60 months.
Chapter 13 is a great way to save a home. Unfortunately, in today’s economy a lot of people are falling behind on their mortgage payments due to various reasons. The most common reason would be loss of job or a loss of hours for income and they fall behind on their mortgage payments. Suddenly, they have five months of mortgage arrears and foreclosure is pending upon them. So one option a person can have if they are eligible for a Chapter 13 is to file a Chapter 13 bankruptcy and stop any foreclosure proceedings as well as catch up on their mortgage arrears.
So what Chapter 13 does is takes your mortgage arrears and allows you to pay those arrears in the Chapter 13 payment plan for 3 to 5 years or once again, 36 to 60 months. This is a great way to save your home because what happens is you essentially become current on your mortgage when you file a Chapter 13 and put those arrears, your mortgage arrears in the Chapter 13 plan. So Chapter 13 is a reorganization of your debt. It’s all of your debt as well. And it is a repayment plan for the debt that you have. Once you explore your alternatives to bankruptcy, you will likely find that filing Chapter 13 is your best option.