Most people who file bankruptcy don’t have a lot of extra money each month. For this reason a Chapter 7 case is usually preferred, because a Chapter 7 will get rid of all of your unsecured debt while a Chapter 13 will require repayment of at least a portion of unsecured balances. The amount of unsecured debt you have to pay back in a Chapter 13 bankruptcy depends on the amount of income you have as it compares to the amount of secured debts you are paying each month. But a safe rule of thumb for the most distressed borrower is that unsecured debt is paid back at pennies on the dollar in a Chapter 13 case. When you add this amount to the secured debts you are paying over the life of your Chapter 13 Plan, which can last up to five years, a total monthly payment is calculated and paid to the Chapter 13 Trustee.
But what can you do if the Chapter 13 Plan payment is too high, and you are still struggling to make the payment? Bankruptcy is supposed to help a struggling consumer get out of debt, not make it more difficult to make ends meet. So here are your options if your Chapter 13 Plan payment is calculated at an amount you cannot afford:
• Surrender a piece of secured collateral. Maybe your family can get by with one car instead of two for a while, and when you agree to give one vehicle back to the lender you no longer have to pay for it through your Chapter 13. Surrendering collateral will remove the need for repayment and lower your overall plan payment.
• Ask the Court to modify your plan, to terms that fit within your budget.
• Seek conversion of your case from a Chapter 13 to a Chapter 7, so the unsecured debts are not part of your repayment total and you only have to pay back what you actually keep.
These choices can work, but do depend on the particular facts of your case. Not every case will qualify for a modification or conversion, and we can tell you what will work for you. Your success and financial recovery is our priority, so call today to find out more.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com.
