What is the chapter 13 bankruptcy plan?
A chapter 13 bankruptcy plan is a salary earner’s way to formulate a repayment plan. The plan assigns regular monthly payments to repay the entire or some areas of the debt. This repayment plan consists of installments and stretches over three to five years. The duration of the plan, however, largely depends on the individual’s net monthly income.
The plan is for three years in the scenario that the debtor’s monthly income is lower than the stated applicable median. However, the duration can extend the duration of the individual to make a convincing case. Conversely, if the debtor’s income is higher than the listed median, the plan can turn into a five-year plan.
Having said that, allow us to mention that the plan cannot go beyond five years whatever the case may be.
Credit Card Debt
When we talk about dealing with debts, bankruptcy isn’t as common and a popular solution as it used to be. However, some people still see it as a viable alternative, considering the factors that lead them here. One of these factors includes credit card debt, one of the major driving factors to bankruptcy.
Before you consider chapter 13 bankruptcy as an option, you should first understand the 13 bankruptcy plans. Credit card debt falls into a different category altogether, which can leave you in a troubling situation.
In chapter 13 bankruptcy plan, an individual needs to work alongside their creditor when it comes to paying back. Debtors will pay back their creditors through proper, well-designed plans. The plan spreads over 3 to 5 years.
Speaking of credit card debt, it is the lowest priority in the chapter 13 bankruptcy plan. Therefore, debtors can pay this debt at the least amount on the dollar. Since credit card debt falls under unsecured debt in Chapter 13, they do not favorably treat it. Furthermore, the lenders are not at all entitled to interest. They only receive payment when everyone else does.
The Chapter 13 plan may clear out 99% of the credit card debt to put it simply. If not this, then you might have to pay a higher percentage amount. However, it depends on the repayment plan and its duration.
How much of Credit Card Debt does one pay under Chapter 13?
As you file for the Chapter 13 bankruptcy plan, you have to fulfill various requirements. These include listing all the creditors and putting forth proposals on how they intend to pay their debts. The payment plan should be more than enough to pay off your credit card debt.
You must pay whatever falls in your affordability in the plan. Hence, if you are able to afford more than just paying for the secured debts, you will then be asked to do so. Based on the leftover amount of money, the credit card company will receive its share.
The Bottom line
While it is true that bankruptcy is never a desirable option, it can prove to be useful. It is especially viable to survive and thrive in a time when a major financial crunch comes in. It can be the road to getting back on the path of becoming financially stable.
However, like with any other big financial decision, it is best to seek out a bit of expert advice and explore all the available options in order to find the best solution to your dilemma related to finance.
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