Filing Chapter 13 To Reduce and Consolidate Your Bills

If you are struggling to pay your bills every month due to insufficient income and/or excessive expenses, there is a way to make your debts more manageable so you can sleep better at night.
Chapter 13 is the section of the US Bankruptcy Code that allows individuals in the United States to reorganize their finances. If you are having difficulty paying your debts (credit cards, medical bills, personal loans, taxes, late mortgage payments and property taxes- all kinds of debts), don’t despair.
Chapter 13 can give you the relief that you need so that you can get back on track as quickly as possible. Let me explain.
We all know how difficult it is to catch up once you start falling behind on debt payments. If you’ve experienced a reduction in income (example: reduced income from employment – or business, if you’re self-employed), Chapter 13 allows you to pay back your creditors (with the exception of a few types of debts, you will also pay 0% interest) over a 3–5-year period based only on the amount of your surplus income every month, not based on how much you owe.
Example: If you owe $80,000 in credit cards but only have $500 in disposable income, it may be possible to put you on a debt repayment plan for 36 to 60 months. $500 x 36 months = $18,000. $500 x 60 months = $30,000. The length of the repayment period will depend on your income. In this scenario, whether you’re paying $18,000 or $30,000 total, the court will consider that as FULL PAYMENT for the $80,000 that you owe! I am simplifying for illustration purposes only. Of course, not all cases are the same, so it will depend on your individual situation. I am merely using this as an example so that you can have an idea of how Chapter 13 works to get you out of debt as quickly as possible and while paying the least amount possible.
In Chapter 13, you also don’t need to worry about losing any assets you may have because you will keep everything and lose nothing. And if you are in business, you will be allowed to continue running your business as usual.
Chapter 13 immediately stops all collection actions against you. That means no more annoying creditor calls, collection letters and no marshals at your door. If you are about to lose your home in foreclosure, Chapter 13 also allows you to keep your home while including all your back mortgage payments in your debt consolidation.
Once the court approves your proposed Chapter 13 plan, creditors are legally bound by the terms of the approved plan and cannot ask for more money. Your bankruptcy attorney can review your monthly living expenses with you, analyze your income and help you propose a realistic payment plan that you can afford.
In most cases, Chapter 13 is a far better alternative than trying to pay debts on your own or hiring a debt management company. This is because in Chapter 13, you cannot be sued by your creditors if you remain under court protection. And if you are being represented by an attorney, all creditor communications go to your attorney so that you do not have to deal with your creditors directly.
Ray J. Bulaon is a bankruptcy attorney and business debt mediator in Valencia who has successfully helped more than 6,000 clients in getting out of debt. For a free consultation, call 866-477-7772 or 661-775-4880.