Harvey Bankruptcy Lawyer And The Chapter 13 Repayment Structure

A Mortgage arrearage is reorganized through Chapter 13.  It’s got to be paid 100% back whatever that arrearage is; the dollar amount must be accurate.  We need to amend the plan to satisfy them.  And then the rest of the creditors, of course, get paid at the end.  So in terms of priority, how the trustee actually pays creditors is interesting, too.  Domestic support obligations, child support and whatnot, those get paid first. I think we can share with them a little bit but they get paid before all the other creditors.  But you still have to pay something to the mortgage while that is happening and something to the car.  That is a concept known as adequate protection. Basically it says that they’ve got to be getting something while you are in your repayment plan.  It can’t all go to the child-support first and the mortgage gets nothing and the car gets nothing.  So they will get something.  But they won’t get the full amount that they should be getting until the domestic support obligations are taken care of and until the attorney’s fee are taken care of. 

Attorney’s fees get paid fairly quickly in a Chapter 13.  A little bit per month as the case goes along but usually within the first year or so we are paid.  Then the car gets paid along with the mortgage.  They will each get a certain amount per month.  That’s known as a set payment.  So let’s say the plan payment we said was $800.  The mortgage arrears might get $250, the car might get $250 and we might get $300.  And then the minute our $300 is done, once we are paid, these guys would each boost up by $150.  But the trustee handles that for the most part.  We just have to make sure that we’re giving some adequate protection and that there is enough to pay.  The plan payment must be high enough to pay everybody secured creditor a little bit at first.

I’m just touching upon this, now.  Just know that unsecured creditors get paid last.  Medical bills, personal loans, credit cards, utilities, services, they are at the end.  Once all the secured creditors are paid, the unsecured creditors will start getting paid for the most part.

Now, if everything goes well, within 36 to 60 months the case is over.  The mortgage arrears are fully instated, the car is paid, you’ve got the title and you have paid whatever percentage you have paid on the unsecured whether it’s 10% or 100%, we don’t know yet.  When the case is done, you get a discharge.  It is then officially over.  That happens about 15% to 20% of the time.

For more chapter 13 bankruptcy information, call David Siegel at (847) 520-8100.