A Chapter 13 bankruptcy allows a person to reorganize their debt by making payments that are significantly less in most cases than what they were paying before, and it does it in several ways. First, you are only required to pay a certain interest rate to most creditors, and right now, in most cases, it is 5.25%. Secondly, in many instances, you are able to lower the amount that you pay down to the value of the collateral rather than the balance that is owed, so that usually reduces the principle that you pay out. Thirdly, you are often able to increase the term over which you pay your creditors of a period of up to five years. And finally, debtors are often able to lower the amount they pay to their unsecured creditors down to pennies on the dollar, if they qualify. At any rate, you are able to pay your unsecured creditors often at 0%.
With those four tools, a Chapter 13 debtor has the ability to lower their payments to a budget they can afford while continuing to keep the things they need in order to reorganize. If you have questions about how to reorganize under Chapter 13 or anything about Chapter 7, feel free to fill out the online form here on our website. Or you can give us a call, and we’ll be happy to go over it with you.