Chapter 13

Facts about filing for Chapter 13 Bankruptcy in Ohio.

Chapter 13 debt protection allows you to meet your obligations through a court supervised and protected payment plan. You must have a regular source of income to qualify for the Chapter 13. The Chapter 13 plan provides for the repayment of any arrearages (past due amounts or back payments) on your secured debt, such as your home or car, over a 36 to 60 month period. At the same time, Chapter 13 may allow you to pay considerably less than what you would otherwise owe without interest. For instance, if you are allowed to pay 10 cents on every dollar you owe in credit card debt, interest free, you have reduced your debt considerably. (Think about paying only $1,000.00 on $10,000.00 of credit card debt over a 36 to 60 month period.) A portion of your car loan may be treated this way in the event you own more than you car’s fair market value. People often refer to this as being “upside down” on their car loan. If you are in this situation, a Chapter 13 court protected repayment plan will essentially rewrite your car loan for you.

With regard to your home mortgage, you must continue to make regular monthly payments, plus a little extra to get caught up if you are behind on your payments. Your mortgage loan may not be modified in Chapter 13; however, if you have missed a number of payments, the repayment plan will allow you to get caught up over the term of the plan (36 to 60 months). Regarding your unsecured debt, the amount these creditors receive will depend on the following factors: Your non exempt equity, your monthly take home pay, your living expenditures, your required secured debt payments and the extent to which you are behind on your secured debt payments. Your income may allow for payment of 100% of your unsecured obligations or some percentage this amount.

How does Chapter 13 bankruptcy work?

In a Chapter 13 case, you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a Chapter 13 repayment plan is that it will allow you to keep valuable property—especially your home and car—which might otherwise be lost, if you can make timely payments through the Court. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage. It will also include at least an amount sufficient to pay off the fair market value of your car along with some payment to your unsecured creditors. You will also be required to pay off any priority claim such as back taxes, child support and certain other types of debts. Chapter 13 is many times more beneficial than Chapter 7 for those debtors who are behind in payments, because it provides the time to bring the obligations current.

You should consider filing a chapter 13 plan if you:

  1. own your own home and are in danger of losing it because of money problems;
  2. are making payments on your home and have fallen behind and are making payments on your car, have fallen behind and/or you owe considerably more than the fair market value of the car;
  3. are behind on debt payments, but can catch up if given some time;
  4. have valuable property, which is not exempt, but you can afford to pay creditors from your income over time;
  5. have a large amount of high interest revolving credit card debt and can only afford to pay a percentage of the debt based on your income

You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due. In addition, if you have considerable equity in your home, you may be requested to pay a higher dividend to your unsecured creditors that would otherwise be required.