If you are preparing to file Chapter 13 bankruptcy for much-needed debt relief, one of your primary concerns is likely the amount of your monthly payments. This amount can vary greatly based on your debt and available income, as well as other factors. A bankruptcy lawyer can help you understand your options and create a manageable payment plan you can stick to.
You do not have to deal with overwhelming debt on your own. A bankruptcy attorney in your area can explain more about the average monthly payment for a Chapter 13 bankruptcy case and your available options. Most law firms will review your case at no cost or obligation.
What Factors Affect Monthly Payments for Chapter 13 Bankruptcy Cases?
There is no “average” payment for Chapter 13 bankruptcy filers since each filer’s debt and income vary greatly. The factors that go into assessing your payment can include:
- Existing debt: Understanding the scope of your debt involves completing a detailed assessment of the total amount of money you owe to all creditors.
- Current income: Your monthly earnings play a role in your payment plan and its duration.
- Mortgage payment: If you are behind on your mortgage (or rent) payments, your bankruptcy payment amount can increase.
Bankruptcy is a complex legal process. The best way to understand and manage the process is to let a local attorney guide you through it.
What You Need to Know About How Chapter 13 Payments Are Approved
Chapter 13 bankruptcy payments are typically calculated based on your estimated disposable income (your total monthly income minus your necessary living expenses).
This disposable income will be allocated to your debts in order of priority. The bankruptcy court will appoint a trustee to oversee your case. While your attorney will help you draft a repayment plan, the bankruptcy trustee must approve it.
Bankruptcy court guidelines require you to attend a meeting of creditors where the trustee and any creditors in attendance can question you about your finances under oath. Your lawyer can help you present a comprehensive and accurate repayment plan.
What Happens if You Miss a Chapter 13 Bankruptcy Payment?
Missing a planned bankruptcy payment can have serious consequences. Some of them include:
- Having your Chapter 13 bankruptcy case dismissed, which means your creditors can resume attempts to collect debts
- Foreclosure of your real estate once bankruptcy protection gets removed
- Repossession or your vehicle(s) if included in your Chapter 13 bankruptcy filing
The best way to ensure you can meet the obligations of your debt repayment plan is to work with a lawyer who can help you establish a plan that meets your specific needs.
Can You Catch Up on Missed Payments and Stay on Your Bankruptcy Plan?
According to the U.S. Courts, your payment plan is binding. If you fail to make the required payments to creditors, the court may dismiss your case or convert it to Chapter 7 bankruptcy. You could attempt to remain under Chapter 13 by requesting to make up missed payments or amend your existing repayment plan.
Sometimes, you can ask about deferring missed payments or request a hardship discharge. Your lawyer will define how you can qualify for these options.
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How Do You Know If Chapter 13 Is the Right Bankruptcy Chapter for You?
The bankruptcy system has multiple Chapters to meet individual filers’ needs. According to the Internal Revenue Service (IRS), when you choose Chapter 13, the eligibility requirements typically include the following:
- A regular source of income
- A maximum of $465,275 in unsecured debt (such as credit cards, medical bills, and personal or student loans)
- A maximum of $1,395,875 in secured debt (such as mortgages and car loans)
Chapter 13 applicants can include individuals, self-employed individuals, and unincorporated business owners. A lawyer can help you determine whether this is the appropriate choice for you.
What Are the Benefits of Choosing Chapter 7 vs Chapter 13 Bankruptcy?
Sometimes, you can choose Chapter 7 bankruptcy over Chapter 13 or convert your Chapter 13 case to Chapter 7. Both Chapters offer the immediate benefit of the automatic stay. Additional benefits include:
- Faster processing times that may provide a speedy resolution
- More dischargeable unsecured debt (credit cards, for example)
- The ability to retain possession of certain property and assets
Ask your attorney about the best option, and be sure to disclose your debts and assets fully.
Do You Need a Lawyer to File for Bankruptcy?
You are not required to have a lawyer to file for bankruptcy but may want to consider doing so. Even the U.S. Courts recommend hiring a lawyer to help you navigate the bankruptcy system effectively. An attorney familiar with the bankruptcy process can:
- Define which debts are and are not dischargeable
- Clarify which real and personal property you can keep
- Define the tax consequences of filing Chapter 13
- Help you develop a repayment plan you can afford
- Clarify bankruptcy law, meetings, and appearances
- Obtain, complete, and file all required bankruptcy forms
When you are ready for bankruptcy relief, consider working with a lawyer who can ensure you meet all required legal parameters.
How Much Does a Bankruptcy Lawyer Charge?
Just like your monthly payment amount, the cost of filing for bankruptcy can vary. Some of the factors that play a role in your attorney’s fees include:
- The number of creditors involved in your filing
- Your ownership of residential or business property
- The amount of your personal or business income
Additional factors can affect your costs, so the best way to understand it is to consult with a team member at a law firm in your area, which you can typically do for free.
Learn More About Chapter 13 Bankruptcy Payments
Bankruptcy can give you a fresh financial start and relieve the stress and frustration of insurmountable debt. If your outstanding debt is overwhelming you, our bankruptcy team can help by developing a debt repayment plan and a plan for sticking to it.
Learn more about the monthly payment for your Chapter 13 bankruptcy case with a free review. Contact our consultation team at Farmer & Morris Law, PLLC for yours.