Chapter 13 Bankruptcy Arkansas
As bankruptcy attorneys, we know that Chapter 13 is commonly referred to as a “wage earner’s reorganization”. It allows people, within certain debt limitations, to consolidate and reorganize their debts and protect secured property necessary to running a household or business.
There are three (3) major reasons for filing Chapter 13.
First, you may not have the attorney’s fee and filing fee necessary to file a Chapter 7 Bankruptcy. Second, you want to keep your property and pay back a portion of your debt. Third, you failed the second rung of the “Means Test” indicating that you have “Disposable Income” which prohibits you from filing a Chapter 7 Bankruptcy.
Usually the major question when filing for Chapter 13 Bankruptcy is: how much will my monthly payment be?
There are eight factors that determine your minimum payment in a Chapter 13 Bankruptcy Arkansas. They are as follows:
- Your Means Test results show you have “disposable income” to pay towards unsecured creditors? Additionally, if your income is above “median” it may affect your plan length also.
- What is your Plan Length? The length of your plan of repayment can be a minimum of 36 months (3 years), unless the Means Test says otherwise, and a maximum of 60 months (5 years).
- What Secured Property you want to keep and pay for? In the case of secured property there are two major options:
- Surrender the property back to the creditor and not pay anything;
- Keep & Pay for the property, and if it was purchased recently (910 days, i.e. 2 ½ years, for vehicles and 365 days, i.e. 1 year, for household goods) pay the balance due plus interest, or if purchased not too recently, pay the balance due or the “retail” value of the property, whichever is less. With a home payment, there are three options:
- Provided the payments are current, continue to pay it directly yourself;
- Make the regular monthly payment through the plan, and if behind on the payment, catch up the payments within the plan, so when the Bankruptcy is over, you will be current and pick up and pay the normal monthly payment; and
- Pay the balance in full within the plan.
- What Leased Property do you want to keep and pay for? More often than not, lease-purchases are not financially wise transactions. If you have leased property, you have three (3) options:
- Reject the lease and let the creditor have the property back and pay them nothing;
- Accept the lease contract as written, and continue to pay them directly, not through the plan, if your payments are current; and
- Accept the lease contract as written, and pay it through the plan, and if you are behind on payments, catch those payments up through the plan.
- What Priority Debt, such as taxes and child support, do you have? All priority debt, except child support, must be paid in full within the life of the plan. We recommend full payment of back child support within your plan. However, if it is not feasible, you may pay whatever the divorce Court requires, usually 10% above your current support obligation. In that case, you will owe unpaid back child support when you get out of Bankruptcy. You must directly pay any current support obligation payments.
- What, if any, Non-Dischargeable Debt (usually student loans) do you intend to repay? Remember, any unpaid amount plus interest and any collection fees will be due after you get out of Bankruptcy. You have two options:
- Ignore the student loan and pay nothing through the plan; and
- Pay your normal monthly payment and catch up what you are behind.
- What, if any, Consumer, Co-Signed or Joint Debts, owed with non-filing debtors, do you intend to repay? You have two options:
- Pay nothing towards the obligation and let the responsibility fall on the co-debtor or person jointly obligated.
- If you wish to protect the non-filing co-debtor, you must pay the debt, in full within the plan, plus interest.
- What, if any, Non-Exempt Property must you pay the value of? If you have property that is not exempt, which is unusual, you will pay the value of the property to the Trustee, through your repayment plan. If you file a Chapter 7, this property would be taken as well as sold by the trustee to pay your debts.
A Chapter 13 Bankruptcy is flexible. During the course of a case, in some situations, you can make your payment go down by surrendering collateral back to the secured creditor. If you have less than a five year plan you may also be able to extend your plan length to reduce your monthly payment amount. Additionally, if for some reason you incur other bills, usually medical, they can, in some instances, be added to your Bankruptcy and be discharged.