SAVAGE LEGAL GROUP

We file cases under Chapter 13 if our clients "fail" the means test (discussed above), or if they are facing foreclosure, eviction, the repossession of a vehicle, or in certain situations, wage garnishment. Chapter 13 is also effective in helping our clients manage student loan debt, taxes or overwhelming domestic support obligations.

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Chapter 13 is a repayment plan, that typically lasts between 3 and 5 years.  While the debtor is under the repayment plan, the debtor pays his/her "disposable income" to a Trustee, who distributes those payments to the debtor's creditors.  "Disposable income," simply speaking, is the difference between the debtor's monthly income, and his/her reasonable monthly expenses.  

 

A common misconception is that a debtor must repay 100% of their debts in Chapter 13 - this is usually not the case.  Since a debtor is only required to pay over his/her disposable income, unsecured creditors (like credit card companies) often receive only pennies on the dollar.

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Under a Chapter 13 repayment plan, the debtor can cure mortgage or car loan arrearages, without fear of foreclosure or repossession.  Under certain circumstances, an underwater car loan can be "crammed down" to the value of the vehicle, and underwater second mortgages can be "stripped off."