There are several kinds of bankruptcy, but the ones individuals use most often are chapter 7 and chapter 13. In chapter 13 we can do a lot of useful things. For instance, if you are behind on a house payment or a car payment we can use chapter 13 to catch up the missed payments over time. If you financed your car more than two and a half years ago we can have you pay the value of the car if that is less than the full amount you owe. Generally speaking you do not give up any assets when you file chapter 13 (unless you want to!) but if that asset is not "exempt" you may have to pay the current value of that asset.
However, one of the great benefits of chapter 13 is that it places all of your unsecured debt into a pool. ("unsecured debt" is, for instance, most credit cards and medical bills). You do not have to pay your unsecured debts in full in a chapter 13. Instead, you have to pay your "surplus monthly income" to the trustee, and the trustee splits that amount up between all of your creditors.
For example, say you are $8,000.00 behind on your house payment, and have another $20,000.00 of credit card debt. Let's also say that when we do your budget you have $400.00 per month of "surplus". Your chapter 13 plan would therefore have you pay your regular house payment becoming due after the case is filed plus $400.00 per month for 36 months, for a total of $14,00.00.* The trustee would pay the $8,000.00 catch up payment to the mortgage company, and after trustee fees and attorneys fees are paid the unsecured creditors would split what's left.
Each case is a little different, which is why I am happy to meet with you at no charge to discuss your options. Feel free to call me at 320-252-4473.
* Many assumptions in this example, including that you are below "median income" -- $74,083 for a household of one, $94,966 for a household of two. This amount is adjusted periodically.
Sam Calvert is a "debt relief agency" and helps people file for relief under the Bankruptcy Code.
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