Chapter 13 is a restructuring bankruptcy because the borrower make payments to their creditors according to a court approved plan. It is intended to help borrowers catch up on secured debt, such as a car loan or home mortgage. With Chapter 13 bankruptcy, you can lower payments, prevent foreclosure, eliminate debt, and stop a car from being repossessed. How Chapter 13 payments are calculated will depend on the specifics of each case. For more information on the possible advantages and disadvantages of Chapter 13 contact a Tampa bankruptcy attorney. Many bankruptcy law firms will offer a free consultation to assist prospective clients.
How Chapter 13 Payments are Calculated
The payment plan outlines how the income the borrower receives will be used to pay off the debts owed. The payment plan is how Chapter 13 payments are calculated. Once the payment plan is confirmed by the court it will bind the debtor and each creditor included in the bankruptcy. A debtor should always seek the aid of a Tampa bankruptcy attorney when submitting a payment plan. An unsatisfactory payment plan can cause delays and unnecessary hardship for a debtor. Additionally, a borrower may end up paying more than they should have if the payment plan is not properly drafted. For instance, your creditors should not be paid more than they would have if you filed Chapter 7. Thus, it is highly recommended to consult with a bankruptcy lawyer if you have questions on how Chapter 13 payments are calculated.
How Long Chapter 13 Payments Last
The Chapter 13 repayment plan can last anywhere from three-to-five years. The Bankruptcy Code provides that if your income is less than the state average income, then you will be in a three-year repayment plan; however, the court can extend your plan up to 5 years if you show that you cannot afford those three-year monthly payments. See Bankruptcy Law 11 U.S.C. §§ 1322. Extending to a five-year plan would not necessarily result in you paying back more money to your creditors; it would just be stretching out your payments in order to make the monthly amount cheaper. If your income is more than the state average income, you must be in a five-year repayment plan. A bankruptcy lawyer can provide more information on which type of payment plan may be required in your case. You should consult with a bankruptcy lawyer before filing for Chapter 13.
How to Discharge Debt in Chapter 13 Bankruptcy
There are a couple ways in which you can receive discharge in Chapter 13. First, if you make all of your Chapter 13 payments in accordance with your payment plan, you will receive a complete discharge at the conclusion of your plan term (somewhere between 3 and 5 years). Second, if you cannot finish all of your Chapter 13 payments under your payment plan for some reason, then the Bankruptcy Code requires you to meet the following three elements in order to receive discharge:
- The circumstances for not being able to make the monthly Chapter 13 plan payments are beyond your control;
- The amount you would have paid to your creditors in a Chapter 7 case is equal to or less than the amount you already paid through your Chapter 13 plan; and
- You cannot modify your payment plan any further in order to make your payments feasible. See Bankruptcy Law 11 U.S.C. § 1328(b).
If you cannot complete your Chapter 13 payment plan, you can still get a discharge, as long as the above three elements are met. However, you will receive a Chapter 7 discharge, not a Chapter 13 discharge. This would affect the waiting period to file bankruptcy again in the future.
Bankruptcy Law Firm in Tampa
If you need information on how Chapter 13 payments are calculated contact us to schedule a free case review with an attorney. A Tampa bankruptcy lawyer at our firm can answer your questions and provide trusted legal advice. Florida Law Advisers, P.A. is a customer-service oriented firm with a strong reputation for providing personalized attention and dedicated legal counsel. For a free initial consultation contact us today at 800 990 7763 or complete the free case review inquiry.