Which Debts Must be Repaid in a Chapter 13 Bankruptcy?

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Which Debts Must be Repaid in a Chapter 13 Bankruptcy?

A Chapter 13 Bankruptcy requires you to pay some of your debts in full and the remainder of your debts to the extent that you can afford to do so.

At a minimum, at the start of your case, you will have to be able to show you are likely meet your obligations to fully pay off your back child support, and taxes

Your plan must also provide for total payments to your unsecured creditors that are at least as much as they would have received had you filed for Chapter 7 bankruptcy. In other words, these payments must be at least equal to the value of your nonexempt property.

Your Plan must also provide for the repayment of any secured debts as well. Where a secured loan financing the purchase of personal property that you wish to retain is over 910 days old, your plan must pay back the only the value of the personal property over the course of your Plan Period. Often this leads to significant savings. Where a secured loan financing personal property is less than 910 days old, your plan must pay back the full value of the loan.

While you you currently cannot use Chapter 13 to cram down mortgages or other liens on your home. You may, however, strip second mortgages under certain circumstances. Where the current value of your home is less than what you owe on your first mortgage, leaving no equity to secure second or third mortgages, you can use Chapter 13 to “strip off” the other mortgages and reclassify these obligations as unsecured debts that need not be paid off even in part during your Chapter 13 bankruptcy.

2011-11-05T20:51:31+00:00
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