A Chapter 13 - Bankruptcy is like a payment plan. You pay your disposable income to your creditors and after a period of 3 or 5 years, your creditors are "eliminated" or discharged. Similar to a Chapter 7 bankruptcy, certain creditors, such as student loans, are not discharged.

 

"Disposable income" is income less amounts reasonably necessary for the maintenance or support of the debtor or dependents.

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Sometimes this can take some steps to get an acceptable Plan confirmed by the bankruptcy court. A Chapter 13 bankruptcy is a useful tool for protecting your nonexempt assets in bankruptcy and is a valuable tool for saving a home from a foreclosure sale.

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A Chapter 13 Bankruptcy plan allows you to pay your debts over time up to a maximum of five years.  

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In a Chapter 13 you can pay back creditors (while stopping court garnishments, proceedings and creditor harassment) often at no interest and not accruing penalties:

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• Foreclosure Sales due to late payments on your home

• Stop repossession of your vehicle

• Recover your booted or impounded car for unpaid Chicago tickets

• Payback overdue and late child-support

• IRS taxes in a bankruptcy and stop the IRS Levy and IRS Liens and other demands.  You basically make your own IRS payment plan

• Payback overdue student-loan payments

• Stop a foreclosure sale to save the equity in your home

• Stop the loss of a driver's license for not having insurance as a result of an accident

• Often you are only paying 10% of what you owe in a Chapter 13 plan

• Stop your wages from being garnished by an aggressive and unreasonable creditor that wants to garnish your paycheck using a court garnishment order on your employer

 

In a Chapter 13, you design your own Chicago Parking Tickets payment plan or Illinois Tollway payment plan in a Chapter 13 plan which is often much more reasonable than dealing directly with the government agencies attempting to collect from you.

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Example of a Chapter 13 Plan

A simple Chapter 13  bankruptcy plan example with these facts:

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Foreclosure sale is scheduled and this case is filed at 8:58 a.m. on the foreclosure sale date for a sale scheduled for 9:00 a.m. of the same day.

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Your mortgage is $1400.00 per month

Total mortgage late amounts $14,0000 (10-months)

Car payment is $ 350 /month

Car Insurance $100 / month

Total Credit card debt is $10,000

Monthly food is $600.00

All other expenses are $650

Monthly credit card minimum:  $265

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Gross Monthly income:        4,000.00

After taxes and insurance:   3,450.00     

 

In this example your monthly payment for 5-years would be $344.50 for 60 months.  The result is your foreclosure sale is not valid since you filed before the actual sale.  Your $14,000 in mortgage lates are paid in full with no interest charged.  Your credit cards are paid $1000.00* and the rest of the unpaid amount was "wiped out" and now you will owe 0.00.  You also paid a total of $5670 in court, attorney and trustee fees as part of the bankruptcy payment and those were paid in full as part of your monthly payment.  To start this, your paid $310.00 as a filing fee.

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In this example, the $344.50 payment is made to the bankruptcy trustee assigned to you and your normal mortgage payment and car loan payment is paid directly to them on a monthly basis.  All your other expenses function as they normally would with the exception of your credit cards (in this case $265) which you no longer have to pay because they are part of the bankruptcy. 

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*Credit cards are an unsecured creditor and they must be paid at least %10 in a Chapter 13 bankruptcy

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To further detail this Chapter 13 example, the breakout would be:

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Total debt in bankruptcy $20,6570

It consists of: 

$14,000 in mortgage arrears

$5,670 attorney fees, court trustee fees for the entire 5-years

$1,000 of your unsecured debt (10% the rest is wiped out)

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The sample monthly expenses are:  $3,100.00
It consists of monthly mortgage $1400

Your car payment: $350

Car insurance:  $100

Monthly Food: $600

All other expenses: $650

No credit card payment!

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Your Monthly Available for payment is $350.00

Which is your (monthly expenses) less your after deductions Net Income of $3450.

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