Chapter 13: How to Reduce Debt and Lower Your Monthly Payments – Ray J. Bulaon

Are you struggling to keep up with monthly debt payments, particularly credit card bills? Do you find yourself with little left after paying for essentials like your mortgage, rent, food, and other basic living expenses? Would you like to lower your monthly payments and make life a little easier?
If you’re facing overwhelming debt, one option available to you under federal law is Chapter 13 of the Bankruptcy Code. Often referred to as “Chapter 13 Debt Consolidation” or “Debt Adjustment,” this option is available to individuals and small business owners. It’s called “consolidation” because it allows you to combine your debts into a single monthly payment. It’s also known as “debt adjustment” because, in many cases, your debts can be reduced so that you don’t have to pay them in full.
For example, imagine you owe $50,000 on credit cards, which require monthly minimum payments of 3-4% of the balance. On a $50,000 debt, that would mean paying around $1,500-$2,000 per month. Due to high interest rates, a big portion of that payment goes toward interest, leaving very little to reduce the principal. Meanwhile, the banks continue to profit, while you struggle to make ends meet, unable to even afford basic expenses like new tires for your car. It may feel like you’re in an endless cycle where you’re getting nowhere.
Paying $1,500-$2,000 a month might feel like a huge burden—equivalent to one full paycheck or more for some people. For those paid biweekly, one paycheck could go toward credit card debt, while the other covers everything else. The problem is, there never seems to be enough to cover all your needs.
If this sounds familiar, Chapter 13 might be a solution worth considering. While each situation is unique, Chapter 13 allows you to make payments based on what you can afford each month. The court evaluates your income and monthly living expenses to determine if you have any surplus funds. For instance, if you have $500 left over after covering all living expenses, that’s the amount you’d be required to pay each month. Depending on your income, you could be required to make these payments for 3 to 5 years.
You may be wondering: “If I’m only paying $500 per month for 3-5 years, does that mean I won’t be able to pay off all my debts? What happens to the remaining balance?”
The great advantage of Chapter 13 is that, in most cases, you are not required to pay your credit card and other unsecured debts in full if you can’t afford to do so (a few exceptions apply- for example, student loans are not dischargeable in Chapter 13 unless paid in full). After completing your Chapter 13 payments, any remaining unpaid debt is discharged. While it might sound too good to be true, this is the core principle of Chapter 13. You can consolidate a wide range of debts, including credit cards, personal loans, missed mortgage or car payments, property taxes, income taxes, student loans, and even back child support.
When you compare the benefits of Chapter 13—such as 0% interest on credit cards, lower monthly payments, and reduced debt balances—to trying to manage your debt independently while dealing with high interest rates, you’ll likely find it much easier and quicker to resolve your debt issues through Chapter 13.
Are you looking to rebuild your credit and start saving again? Or perhaps you dream of buying a home someday but need to clear your debts first? If your debts have spiraled out of control and you’re in need of legal assistance, it may be time to explore whether Chapter 13 could provide the relief you need for your situation.
Ray J. Bulaon is a debt and tax relief attorney in Valencia who has helped more than 6,000 clients get out of debt. Call his office at 866-477-7772 or 661-775-4880 for additional information.