When you file for bankruptcy, all debts are not supposed to be paid in a similar fashion in Chapter 13 bankruptcy case. According to Los Angeles based bankruptcy law firm Recovery Law Group, the amount you need to pay depends on whether the claim is a secured, priority or an unsecured claim. In case you are confused regarding the aspects of bankruptcy, contact with expert bankruptcy lawyers at 888-297-6023 to clear your doubts.
Those debts in which the creditor has collateral, These include car loans and mortgages. Payments of the secured loan depend on how long the loan has been taken; is your loan underwater and the rules of the court. Non-payment of debt in case of a secured loan will result in the creditors collecting the collateral and selling it to clear the debt. Filing for Chapter 13 bankruptcy can help you protect your property if you stay current on our payments and pay off any arrearages during your repayment plan. Some important points to remember are:
- In case your payments are intended to last longer than the repayment plan (as in the case of mortgages), you are not required to clear the debt in
- You have the option of cramdown where you can reduce the payment of your car or any other property to the current market rate.
- A second or third mortgage can be wiped out by stripping the lien.
- You can also catch up on arrearages through the repayment plan.
In case of mortgage debts, you need to make monthly payments over the period of your repayment plan and even after the case ends, depending on how long the secured debt was taken for. If you are behind your payments, you can catch up through the repayment plan. You need to pay the arrears and the interest you incurred over the period of your repayment plan.
Any past due to property tax can be repaid with full interest over the period of your Chapter 13 repayment plan. Similarly, you can use the repayment plan to catch up on your car loan. You need to pay the entire balance before your repayment plan ends. You can ask for a cramdown of your car loan to the amount the vehicle is currently worth if you had purchased the car 910 days prior to a bankruptcy filing. You end up paying the market value of the car along with the interest through the plan. Any remaining due is treated as unsecured debt.
These types of claims do not have collateral attached and hence the creditor cannot take any property if you cease to make payments on the loan. Unsecured claims are of two kinds:
- Priority unsecured claims
There is no collateral involved but they are prioritized over non priority unsecured claims when it comes to paying debts. These claims are not discharged during bankruptcy and you need to make payments towards them throughout the Chapter 13 repayment plan. These debts include any recent income tax debts, past due child or spousal and administrative expenses.
- Nonpriority unsecured claims
Any claim which does not fall in the above categories constitutes a non priority unsecured debt. These include personal loans, credit card debts, medical bills, and utilities. A percentage pro rata share of your disposable income or the value of your exempt property (whichever is higher) is used to pay for your unsecured claims. In most cases of Chapter 13 bankruptcy Dallas, a small portion of the unsecured debt is paid, and the remaining is discharged.