Ways Of How Chapter 13 Can Help You Decrease Debts
Whether you have massive student debt, medical debts, or credit card debts, if you are no longer able to keep up with all of your loan repayments and are concerned that you may lose important assets as a result of your debt, you may be seriously considering filing for bankruptcy. If you're currently leaning towards using Chapter 13 to file for bankruptcy in order to safeguard some of your assets and to allow you to get on top of your finances, you may be interested in finding out how Chapter 13 can decrease your debts.
Does Chapter 13 lower your debt? Yes, while you will still need to put a plan in place in order to catch up with your secured debt payments, as you won't be required to pay back your unsecured debts in full, your overall debt will decrease substantially.
Some of the types of unsecured debt which you will not have to pay back in full including any credit card debts which you may have accumulated as well as any medical bills that you have not paid. As an added bonus, you will not be forced to make payments towards your unsecured loans for the 3-5 year duration of your bankruptcy, which will also make it easier for you to make regular payments towards your secured loans. Such as your mortgage.
If a large chunk of your personal debt is attributed to student loans that you have not paid off, unfortunately, your student loans can't be automatically wiped by filing for Chapter 13. However, one of the advantages of filing for Chapter 13 is that in the 3-5 year period after your bankruptcy is filed, you should be able to reduce the amount which you pay towards clearing your student debt. This is great news if you have a large mortgage as well as student debt and would struggle to make your mortgage payments to prevent your home from being seized by your bank. As if you can pay less student debt per month, you'll be able to catch up on your mortgage payments.
However, do keep in mind that once the 3-5 year time period after your bankruptcy comes to an end, you'll be required to continue paying your student debt, until it is paid off in full. This is due to the fact that in the United States, student debt is classified as a non-dischargeable debt, which you can't get out of paying, even if you file for bankruptcy. There is however a silver lining and during the term of your bankruptcy, creditors will not be able to seize any of your funds in your bank accounts, in order to pay for your student debt.
If you're curious about how much of your medical debt you'll be able to clear through filing for Chapter 13, the answer will depend on your specific circumstance. Typically your medical debt will be lumped into a pool of your total debt. Then depending on factors such as your income, your equity, and assets, you'll be made to pay back a certain amount of this total debt. So please note, that you will not be expected to pay back the vast majority of your medical debt. Instead, you will merely pay back a portion of your total debt, excluding your secured loans, via your bankruptcy payment plan.
As an example, the court may stipulate that you are required to pay back 30% of your total unsecured debts and that 70% of your total debts will be wiped. So if you want to substantially lower your debt, in order to help yourself regain financial control of your future. Opting to file for Chapter 13 in order to get rid of over 50% of your unsecured debts such as your medical bills and credit card payments may be a great choice.
Credit Card Debts
If you were guilty of charging too many purchases which you could not afford to your credit card and now you have massive credit card debt, your credit card debt which is considered unsecured debt will also be added to your total amount of unsecured debt. Along with any medical debts and personal loans which you may have outstanding. Again, note that you will only be required to pay back a small portion of this debt. So you will not have to worry about finding the funds to pay back your credit card debt in full if you choose to file for Chapter 13.
Unfortunately, you will not be able to wipe alimony payments from your bankruptcy payment plan and if you were previously married in a state where alimony payments are required, you will still be required to pay your alimony payments. During your 3-5 year bankruptcy and after your bankruptcy.
As well as having to pay alimony payments if you have been court ordered to do so at the demise of your marriage you'll also need to continue paying child support payments if you have been court ordered to do so.
If you have a mortgage on your home that you want to protect, during your bankruptcy you'll need to catch up on your mortgage payments in order to be able to keep your home. By filing for Chapter 13 a trustee will be appointed who will be in charge of processing both your home mortgage repayments and your mandated unsecured debt repayments on your behalf. By filing for Chapter 13 and decreasing your overall debt, you should find it achievable to catch up on your mortgage repayments during your restricted 3-5 year bankruptcy.
In conclusion, yes filing for Chapter 13 in the United States is a great option if you have massive student debts, credit card debts, or medical debts or are struggling to make your mortgage repayments with all of your liabilities. If you want to file for Chapter 13, in order to take control of your financial future, it's a wise idea to speak to an experienced, bankruptcy lawyer, who you feel that you can trust, at your earliest convenience.