Rockville Chapter 13 Bankruptcy Attorney
Debt Repayment in Chapter 13 Bankruptcy
Because of congressional amendments several years ago, the Bankruptcy Code took an unmistakable turn in favor of Chapter 13 bankruptcy for consumer debtors. Maryland residents can't even file for Chapter 7 relief unless their net household income is less than the Maryland state median. To learn whether Chapter 13 relief makes sense for you, contact an experienced bankruptcy attorney at the law firm of Steven E. Mirsky, LLC, in Rockville, Frederick or Laurel.
The main feature of Chapter 13: you pay back part of your debts
Unlike Chapter 7, which offers a complete discharge of most unsecured indebtedness, Chapter 13 bankruptcy requires you to pay back some of the debts that you'd walk away from in a Chapter 7 case. You have three to five years in which to perform under your Chapter 13 plan.
Our goal as your bankruptcy lawyers is to develop your plan in such a way as to keep your payments on unsecured debts as low as possible while taking care of the debt pressures — mortgage foreclosure, wage garnishment, or auto repossession — that led you to bankruptcy in the first place.
How much will you have to pay in a Chapter 13 plan?
Sometimes known as a wage-earner's plan, the Chapter 13 plan provides for regular monthly payments to a bankruptcy trustee, who in turn is responsible for making payments to each of the creditors entitled to share in your plan. Your payments into the plan will usually cover such items as:
- Past-due mortgage obligations prior to bankruptcy
- Unpaid taxes
- Defaulted car loan payments
- Any other arrearages on secured or nondischargeable debt
- A portion of your unsecured debt
So how much will you need to pay to unsecured creditors? As much as you would pay them in a Chapter 7 case, and just a little more. This amount is a function not of your income, but of the value of your nonexempt assets. If you have a lot of equity in your house, for example, you would need to pay the amount that exceeds your general $12,000 exemption toward your unsecured debts, even in Chapter 7. Nowadays that's not much of a problem for most debtors.
In a typical Chapter 13 case, our clients pay some percentage of their unsecured debts through their plans. Any unpaid amount remaining after completion of your plan is discharged. As a general rule, the more valuable your nonexempt assets, the higher percentage of unsecured debts you'll pay off over time.
Occasionally a bankruptcy client will have too much debt — more than $1,010,650 in secured claims or $336,900 in unsecured claims — or too many assets to qualify for or benefit from Chapter 13. In those cases, we will recommend a consumer Chapter 11 reorganization case.
To learn more about our attention to detail and commitment to your financial welfare in a Chapter 13 case, contact a lawyer at the law firm of Steven E. Mirsky, LLC in Rockville, Frederick or Laurel.
