The typical Chapter 13 starts off much like a Chapter 7; however, to claim bankruptcy under Chapter 13 is much more complicated and requires additional work. If you live in West Chicago, I would recommend that you meet with a West Chicago bankruptcy attorney to discuss your situation. In any event, the heart of any Chapter 13 is the Chapter 13 plan which is how the debtor proposes to repay creditors. Under the plan, the debtors will propose a repayment structure that will pay the appropriate creditors the appropriate amounts to effectively reorganize the debt. A filing under Chapter 13 can be used to save a home from foreclosure, restructure an auto loan over a longer period of time, pay tax debt and domestic support obligations, and to pay unsecured creditors a percentage of the debt.
Some debts are paid back at one hundred percent (100%). For mortgages on properties, the debtor will generally resume or continue making their regular monthly mortgage payments. Any mortgage arrears (payments due and owing from before the bankruptcy filing date) are paid through the plan. This method allows debtors to try to save their home from foreclosure. Your Chicago bankruptcy lawyer will be able to determine which debts will have to be repaid in this manner.
For secured debts like vehicle loans, the debt will typically be restructured and paid through the bankruptcy as a fixed monthly payment. This method helps debtors by extending the term of repayment and, in many cases, reducing the interest rate. The fixed payments can also be higher than the creditor would have received under the original contract, depending on the amount of the overall plan payment. Priority debts like taxes and domestic support obligations are paid at a priority level through the plan, as are the debtors’ attorneys’ fees.
Some debts are paid back at a percentage of the total debt owed. Last to be paid through the Chapter 13 bankruptcy plan are the general, unsecured debts. These creditors typically include credit cards, student loans, and most debts not secured by property. You certainly need the proper bankruptcy advice to determine which and how much some creditors are paid under the plan. Basically, the amount these debts are to be paid is determined by three factors.
(1) At a minimum, unsecured creditors must be paid 10%.
(2) Unsecured creditors must be paid the debtors’ disposable monthly income, as determined by Schedules I and J and Form 22.
(3) Unsecured creditors debts must be paid the equivalent to what they would receive in a hypothetical Chapter 7 liquidation.