Sometimes, the best way to address all queries is FAQs. By listing some potential doubts or questions and answering them in the best way possible can give enlighten people better. Chapter 13 bankruptcy one of the most popular bankruptcy code especially for people who had wished to safeguard their assets. By answering a few FAQs below, we try to enlighten you about most aspects of Chapter 13. To know more about bankruptcy, Chapters, and legal assistance, log on to Recovery Law Group.
- How much debt has to be repaid if I file for Chapter 13 bankruptcy?
This is a very common question. The amount of debt to be paid is usually limited to the nonexempt assets in the case of Chapter 7. How much debt will be repaid under Chapter 13 can be a tricky question and not as straight forward as Chapter 7. Let’s list different type of debts and determine the approximate percentage you may have to pay off under Chapter 13-
- Fees
All types of fees, bankruptcy fees, trustee fees/commissions, attorney fees, etc., are to be paid off in full. Under most circumstances, 100% liability on these fees is applicable.
- Priority debts
These kinds of debts are determined by state and federal codes. These usually include child support payments, alimony, state / federal tax dues, wages/commissions owed to the employees (up to a threshold), contributions owed to an employment benefit fund, etc.
- Secured Debts
Secured debts are debts which are secured by collateral or an asset. Since secured debts usually have lien attached to it, it is important to pay off the debt in full in order to retain the asset.
- Unsecured Debts
Debts which have no collateral or asset attached are referred to as unsecured debts. It is a debt which is backed by the promise to pay back. This kind of debt is usually released or discharged during bankruptcy the most. In Chapter 7 bankruptcy, you are most likely to pay less than 10% of unsecured debts depending on the amount received from liquidating the surrendered or nonexempt assets. In the case of Chapter 13, the percentage might vary based on the portion of disposable income available after keeping for fees, priority and secured debts. One might end up paying no unsecured debts to about 100% of unsecured debts depending on the scenario.
- What is the duration of the Chapter 13 payment plan?
The duration of Chapter 13 can be maximum up to 5 years. The tenure is usually determined based on the state / federal median. For income less than the median threshold, the tenure is limited to 3 years. For income above the median, the tenure can be 5 years. If you end up clearing all your debt in 4 years, that would be the duration of your program.
- Can Chapter 13 prevent home foreclosure?
Chapter 13 is always a great option to protect secured or unsecured assets. For a home which is a secured asset and has a lien attached to it, Chapter 13 bankruptcy can definitely help. Firstly, once the bankruptcy is filed, the filer gets an automatic stay activated which prevents the mortgage lender to make any efforts to recover his/her debts. Secondly, you can create a payment plan and get some extra time to pay off all the arrear mortgage payments. Therefore, Chapter 13 bankruptcy can definitely help in preventing foreclosure of your home mortgage.
- Can retirement benefits be eligible for creating payment’s plan under Chapter 13?
As long as there is income which results in some disposable income after getting rid of standard expenditures, it can be used as a source to fund the Chapter 13 payment plan. It is important to have some disposable income to be eligible for Chapter 13 apart from the debt thresholds.
- IRS tax debt, how can Chapter 13 prove beneficial over Chapter 7?
There are some debts like the IRS tax debts that do not get released under Chapter 7. You lose your assets and still are liable for the tax debts and other non-releasable debts. Chapter 13 bankruptcy also does not result in the release of IRS tax debt, but, gives sufficient time and makes for paying off IRS tax debt as a priority. 100% of IRS tax debt has to be paid off in both scenarios Chapter 7 and Chapter 13. It is slightly easier when adjusted in Chapter 13 payment’s plan.
- Whom to contact for best assistance?
Dial +1 888-297-6203 for professional assistance and solutions for all your bankruptcy-related issues.