This type of debt relief is often referred to as the “Wage Earner Plan”. It is designed for people who earn a wage or receive other monthly income, such as social security, unemployment, disability and do not earn a high enough income to pay all of their debt.
Like the Chapter 7, Chapter 13 bankruptcy can eliminate a large portion of your unsecured debt. Often, people pay only pennies on the dollar to credit cards, hospital bills, personal loans and certain back taxes.
Chapter 13 is a powerful tool that allows you to save your house, cars and other property.
Chapter 13 is often used in the following way:
Jane comes into the office and owes $10,000 on her back mortgage payments. Her monthly mortgage payment is $500 per month. She was served by the sheriff last night with a foreclosure notice. She has attempted to modify her loan with the mortgage company, but last week, after sending in the modification paperwork several times, she was denied the modification.
Jane also has a vehicle that she purchased 3 years ago and because she did not have great credit, her interest rate was 12%. In addition, she traded in her old automobile and she had negative equity on her loan. She now owes $15,000, but the car is only worth $7,000. Her monthly payment is $395 per month.
Jane has $17,000 in credit card bills and $2,000 in hospital bills.
Chapter 13 allows Jane to have up to 5 years to pay her mortgage arrears back. Once she files, she will make her monthly mortgage payment of $500, and will only have to pay $167 per month to cure the $10,000 that she is behind. Best of all, the foreclosure stops and Jane is able to keep her house.
Jane’s vehicle can be spread out for 5 years, and because of the date on the car note, she will only pay back the vehicle’s value of $7,000, with 5.25% interest. Her new car note payment will only be $132.90 per month. Jane will not lose her car. The $17,000 in credit card debt and $2,000 in hospital bills will be basically wiped out in the Chapter 13.
At Weik Law Office, our Raleigh Chapter 13 bankruptcy lawyers is dedicated to helping you find a solution to your financial problems as quickly and easily as possible. Contact Weik Law Office to learn more about Chapter 13 bankruptcy and how we can help you.