A person walks into my office under a sever amount of financial stress. They have not slept well in weeks. Creditors are calling them day and night. It feels like the world is crashing down upon them. Chapter 13 comes to the rescue. They leave my office feeling like a great weight has been lifted and now look forward to the future. Happy ending.
I wish that this was how it is with all of my clients. However, you already know that it does not always work out this way. The purpose of this blog post is to give you an idea of what a Chapter 13 plan payment includes and what it does not include.
At times, some potential client expresses anger when I tell them how much their monthly plan payment in a Chapter 13 will be.
“What! You cannot possibly expect me to make that payment! Haven’t you looked at my budget! I cannot afford that” they will mistakenly say.
In most cases, the person will calm down once I fully explain and they understand what the Chapter 13 plan payment includes. In almost every case in the Northern District of Georgia, your Chapter 13 plan payment includes:
- your car payment
- your credit card payments
- all of your medical debt
- all of your past due mortgage payments
- your attorney fees
- your trustee fees
- past due taxes
- personal loans
- past due HOA fees
- any judgments that you may have against you
Your Chapter 13 plan payment will not include:
- future mortgage payments
- future child support
- future lease payments
- 401k loan repayments
Most people will breath a huge sigh of relief once they understand what the Chapter 13 plan payment will cover. There is no more car payment. There are no more credit card or medical debt repayments. Bill consolidation can be a huge relief.
However, there are those cases where the Chapter 13 just won’t work. For example, let’s say you have a person who owes a huge amount of past due child support. Child support cannot be eliminated in a Chapter 13 or a Chapter 7. All Chapter 13 plan have a limit of 60 months. As consequence, there are some situations where you take the total amount of past due child support is so large that it cannot reasonably be repaid within 60 months. However, if the consumer can get the child support recipient to agree to smaller direct payment for the past due child support, the case may work.
The most common disappointment with Chapter 13 is that it does not cover future mortgage payments. If your monthly contractual mortgage payment is too high, Chapter 13 is not going to bring it down.
The purpose of this blog post is to give you a general idea of how Chapter 13 works. Don’t assume that you know exactly how it will apply to your specific case. If want to know how it specifically applies to your situation, you must sit down with a bankruptcy attorney and give them the opportunity to review your entire economic situation.