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How much do I Need to Pay in Chapter 13 Bankruptcy?

woman got bankrupt

Chapter 13 bankruptcy is for people who want to keep their car or home but are unable to pay the current amount due under the terms of the original contract. Payments under this plan are made to a trustee or administrator appointed by the court. This is the person who distributes the money to your collectors. Other Chapter 13 filers do so because some of their property is nonexempt, or their income is high enough to warrant a trustee or creditors abuse lawsuit. A good bankruptcy attorney Hopewell located can explain the variables to you.

The Salaried Plan

A Chapter 13 bankruptcy allows small business owners and individuals with missed mortgage payments, vehicle payments, or who may be part of an existing lawsuit to pay off or make up the missed mortgage payments. Payment is made through a “salaried plan,” which could last 3 to 5 years. Unless the creditor seeks relief in bankruptcy court, the creditor is not permitted to be a nuisance to the person or try to take hold of the property during this time. If you do not carry insurance on the security or have not made your bankruptcy payments, the secured party has the right to lift the stay. During this time, if payments are not made or insurance is not paid on the security, the lender can forfeit the agreement, which was initially made. You should seek the advice of a bankruptcy attorney in Richmond va.

The Automatic Stay

As soon as a person or corporation files a bankruptcy petition in the Court, under any chapter of the Bankruptcy Code, it is immediately protected by the automatic stay, which prohibits, with few exceptions, all collection management in any way, including any lawsuit filed against the bankrupt debtor. Also, it leaves without effect any lien on the property of the debtor, such as a mortgage or a notation of garnishment, garnishment of wages, and the like.

A Chapter 13 administrator uses three separate methods, Financial Appraisal, and Asset Value Settlement, to calculate the number of assets to be paid in relation to the Chapter 13 payment plan. The initial method is the “Financial Assessment,” also used to calculate whether a person is qualified to file for Chapter 7 bankruptcy. Check with a Richmond VA bankruptcy lawyer for more clarification.

Calculating the Payment Plan

A Richmond VA bankruptcy attorney can help you calculate the payment plan. The financial evaluation determines if the person receives more than the median income of their state of residence. If a person files their taxes as “single” and has no dependents and receives less than the average gross income of a worker in the state in which they reside each month, then that person is not required to return any monetary amount to the non-priority and unsecured creditors, such as credit cards. This means that this person’s payment plan is the amount of money that remains after paying the rent or mortgage and other living expenses, such as food, clothing, utilities, and the like, without paying any creditors’ bills. For example, if a person earns less than the average gross monthly income, at least $3,800.00 net, and only spends $3,300. 00 in rent, clothes, utilities, food, car payments, etc. each month, so that person’s payment plan would probably be $500.00 per month. If that person earned more than the average gross monthly income, then the payment plan for that person would be both the excess income over the average and the remainder of the monthly disposable income after subtracting the IRS standard life limit.

Most bankruptcy attorneys in Hopewell VA will tell you that this is a very general overview of the process that encompasses filing for Chapter 13 bankruptcy, and the process used by a trustee to learn about the debtor’s monthly payment plan.          

How Can an Attorney Help?

Filing for bankruptcy can be a solution to managing and paying off your debts, allowing you to keep your property and start over with a clean slate. Chapter 13 bankruptcy is ideal for people attempting to avoid foreclosure, sheriff’s sales, or altered tax sales. In this case, you would need to consult with one of the bankruptcy lawyers in Hopewell VA such as Canfield Wells LLP.

Contact Canfield Wells LLP

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