Chapter 13 Bankruptcy

If you can't qualify for a Chapter 7 Bankruptcy but your monthly credit card bills are too much for you to handle, you might want to consider filing for a Chapter 13 Bankruptcy. This is where you use your "disposable income" to pay your credit card bills over a period of years.

The term "disposable income" means your gross income minus your everyday living expenses i.e. mortgage payment, car payment, food, electricity, gasoline, etc. However some of those expenses cannot be your "real expenses" but must be what the IRS believes that expense should be. For example the IRS believes that the most a single person should spend a month for food, clothing and other items is $517.00

Let us take an example of a person making a gross income of $4,000 per month. His monthly taxes are $400, mortgage payment $1,500, car payment $350 and alimony payment $300. In addition the IRS Local Standard for non-mortgage expenses (i.e. utilities, maintenance, etc) for one person is $431. The IRS National Standard for Food, Clothing and Other Items for a family of one is $517. The IRS Local Standard for gasoline and costs of maintaining one vehicle is $275. Therefore to determine this person's "disposable income" you would deduct the total of these expenses (i.e. $3,773) from his gross income of $4,000. This would leave a "disposable income" of $227 per month. In other words he would have to pay $227 a month to the credit card companies over a period of five (5) years. If this amount is approved by the Trustee then the credit card companies would have to accept this amount.

If that person had $60,000 in credit card bills and was paying $2,500 per month on those bills then ,by filing for a Chapter 13 Bankruptcy, he would be saving $2,273 a month. In addition he would pay this $227 to only one person, the trustee, who would distribute those monies to the credit card companies.

In addition, at the end of the five years, the remainder of the debt would be discharged i.e. wiped out. In this case at the end of 5 years that individual would have paid a total of $13,620.00. The remainder of the debt (i.e. $60,000 - $13,620 = $46,380) would be discharged.

As you can see this may be a excellent alternative for many people.

Please understand that there are many additional rules and requirements that I have not discussed in this article. Your situation may be more complex. Therefore you should hire an attorney to handle this matter for you.

Let me use my over twenty-five years of experience to help you.

Etting Rid Of Your Second Mortgage In A Chapter 13 Bankruptcy