If you are thinking about filing for Chapter 13 bankruptcy, find out which debts must be paid in full. This way you can calculate whether you have enough income to get through a Chapter 13 repayment plan. You can also seek professional advice from a bankruptcy attorney. Bankruptcy lawyers Carlsbad CA residents rely on will inform you of the requirements that must be met in order to file for Chapter 13 bankruptcy.

Priority and general unsecured debts

There are certain debts that must be paid in full within the required plan period. They are called priority debts. If your income isn’t enough to get them covered, the court will not confirm your repayment plan. On the other hand, general unsecured debts have to be paid back only to the extent you can afford, after you pay off priority debts.

Priority debts are unsecured debts that are listed in the Bankruptcy Code. Chapter 13 Discharge will not wipe out your income taxes debts, administrative expenses, the Chapter 13 trustee’s fees, alimony and child support arrears, debts for customs, fines, and penalties you owe to governmental units.

The most common general unsecured debts include credit card debts, medical bills, personal loans, most types of lawsuit judgments, and unpaid utility bills. Generally, nonpriority unsecured debts are the easiest obligations to eliminate in Chapter 13 bankruptcy because they receive no special treatment under the law.

Student loans are considered nonpriority unsecured debts but are not easily discharged in Chapter 13 bankruptcy. If you cannot fulfill your student loan obligations, you can reduce your monthly payments through your Chapter 13 plan. Just keep in mind that you’ll still owe the rest of the loan after you complete the repayment plan.

In case you have little or no income, you might be able to get your student loan discharged based on undue hardship with the help of bankruptcy lawyers in Carlsbad CA or another area you live.

Secured Debts

Secured debts are the ones linked to a physical asset pledged as collateral for the loan. This collateral serves to secure a debt and reduce the risk associated with lending. For the most part, if you want to keep the property, secured debts must be paid off with interest under the plan. Debts that must be paid in full include tax liens on your property, judgment liens that cannot be removed, as well as missed car payments.

In case you want to keep the property whose market value is less than the amount you owe on the loan, you can reduce the secured debt to property’s value. This is called a cramdown, and it is a powerful remedy. There are certain exceptions, though, such as time limitations on a car or another personal property cramdown. Also, you cannot cram down mortgages on your primary residence.

In certain situations, if your ongoing payments normally last longer than your repayment plan, you don’t have to pay off the entire secured debt during that time. Therefore, you don’t have to pay your mortgage in full. It is classified as ongoing debt, so you just need to continue with your monthly mortgage payments and keep on paying when you come out of bankruptcy. However, if you have a past due balance, you will have to pay the missing payments with overdue interest and fees over the life of your plan.

Seeking expert bankruptcy lawyers Carlsbad CA?

If you are uncertain which debts Chapter 13 bankruptcy can or can’t eliminate, consult one of the bankruptcy lawyers Carlsbad CA residents rely on. Let our attorneys at Chang & Diamond, APC examine and reorganize your debt through debt consolidation plans. Contact us for a free initial consultation and get our expert advice on the subject.