What happens in Chapter 13 Bankruptcy? Debt Settlement?

My husband and I are at the beginning stages of considering Chapter 13 bankruptcy, but are really confused about what will happen.

We owe about ,000 in credit card debt, ,000 in auto loans, and ,000 in student loan debt. We are upside down on our house, about ,000 under what we bought it for 2 years ago. The loan amount was 00 per month, but due to increases in property taxes the monthly amount is now 50.

Last year we signed up for Consumer Credit Counseling and was paying our creditors on time. Money was tight but we were making payments. However, when our house payment went up we had to start choosing which bills to pay. My husband cannot get more overtime and I am facing possible work furlough.

We withdrew from the CCCS program and have not paid our credit cards in about 4 months. We contacted the companies to attempt settle the debt. What are the odds that they will settle with us? If not, are we eligible for Ch. 13, and if so, what will happen in that process? Do all our debts go away or will we have to do a payment plan–and is it for the full amount or a reduced amount? Will we be able to keep our house, car, etc?

Thanks for any help, it is appreciated!
I heard there was a difference between Ch 7 and Ch 13, where your debts are forgiven in 7 but not 13. Since my husband and I make over 0K a year I am worried we won’t qualify for 7.

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Tue, Oct 27, 2009

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4 Months, Auto Loans, Ch 7, Chapter 13 Bankruptcy, Consumer Credit Counseling, Credit Card Debt, Credit Cards, Creditors, Debts, Odds, Property Taxes, Student Loan Debt, time money, work furlough

Tags: 4 Months, Auto Loans, Ch 7, Chapter 13 Bankruptcy, Consumer Credit Counseling, Credit Card Debt, Credit Cards, Creditors, Debts, Odds, Property Taxes, Student Loan Debt, time money, work furlough

2 Responses to “What happens in Chapter 13 Bankruptcy? Debt Settlement?”

doreen k Says:
October 27th, 2009 at 3:04 am

If you are determined to avoid bankruptcy, you may be able to get help with your mortgage from the federal government. If your mortgage payments were manageable, you could possibly reinstate your debt management plan with Consumer Credit Counseling. Go to http://www.makehomeaffordable.gov to see if that is a possibility.

If you have given up and ultimately decide on bankruptcy, you may qualify for a Chapter 7 bankruptcy (a complete discharge of qualified debts) if your income is insufficient to pay essential living expenses. Any federal student loans will not be eligible for discharge in any kind of bankruptcy. Also, you will probably lose your home if you choose a Chapter 7.

If your income is greater than the median area average AND you have enough income to pay essential living expenses, you will not qualify for a Chapter 7 bankruptcy. In that case, you can choose a Chapter 13 bankruptcy, which is somewhat similar to a debt management plan. In a Chapter 13 bankruptcy you will be required to pay some or all of your outstanding loans during a five-year repayment period. You can keep your home in a Chapter 13 bankruptcy provided you can maintain the payments within the repayment plan.

It would be best to consult with a bankruptcy attorney for all the details, but keep in mind they will probably encourage you to file bankruptcy because that is how they are compensated. I encourage you to do everything you can to avoid the bankruptcy. You are going to be more financially successful in the long run if you make the sacrifices needed to overcome this financial hardship. You will learn things from this experience that you will not learn from declaring bankruptcy. And, keep in mind that your credit report and credit score will be negatively impacted for ten years if you declare any kind of bankruptcy.

Good luck and best wishes for the future.

C C Says:
October 27th, 2009 at 3:04 am

In general, when you file bankruptcy, you list everything you owe. You can keep your cars, but have to keep up payments if you want to. If not sell them or return them. Credit cards are forgiven…not the student loans though.House will be the same unless you decide to downgrade but market is bad so you’re probable better staying. Consult a lawyer who will file for you; have all bills for him to review.

doreen k Says:
October 27th, 2009 at 3:04 am
If you are determined to avoid bankruptcy, you may be able to get help with your mortgage from the federal government. If your mortgage payments were manageable, you could possibly reinstate your debt management plan with Consumer Credit Counseling. Go to http://www.makehomeaffordable.gov to see if that is a possibility.

If you have given up and ultimately decide on bankruptcy, you may qualify for a Chapter 7 bankruptcy (a complete discharge of qualified debts) if your income is insufficient to pay essential living expenses. Any federal student loans will not be eligible for discharge in any kind of bankruptcy. Also, you will probably lose your home if you choose a Chapter 7.

If your income is greater than the median area average AND you have enough income to pay essential living expenses, you will not qualify for a Chapter 7 bankruptcy. In that case, you can choose a Chapter 13 bankruptcy, which is somewhat similar to a debt management plan. In a Chapter 13 bankruptcy you will be required to pay some or all of your outstanding loans during a five-year repayment period. You can keep your home in a Chapter 13 bankruptcy provided you can maintain the payments within the repayment plan.

It would be best to consult with a bankruptcy attorney for all the details, but keep in mind they will probably encourage you to file bankruptcy because that is how they are compensated. I encourage you to do everything you can to avoid the bankruptcy. You are going to be more financially successful in the long run if you make the sacrifices needed to overcome this financial hardship. You will learn things from this experience that you will not learn from declaring bankruptcy. And, keep in mind that your credit report and credit score will be negatively impacted for ten years if you declare any kind of bankruptcy.

Good luck and best wishes for the future.
C C Says:
October 27th, 2009 at 3:04 am
In general, when you file bankruptcy, you list everything you owe. You can keep your cars, but have to keep up payments if you want to. If not sell them or return them. Credit cards are forgiven…not the student loans though.House will be the same unless you decide to downgrade but market is bad so you’re probable better staying. Consult a lawyer who will file for you; have all bills for him to review.