I have a good job, but can’t ever seem to catch up. Can a Chapter 13 case help with cash flow?

Under bankruptcy statute 11 USC 1326(a), the first Chapter 13 plan payment is due within 30 days of filing a case.  By timing when you file a case properly, we can sometimes avoid making a month of mortgage payments or car payments in order to improve your household’s cash flow.  In short, by skipping a payment and making it up in the course of our Chapter 13 Plan, you can establish a bit of a reserve in your bank account.  Attorney fees are frequently paid as part of your plan payments, and are not required entirely up front as they are in a Chapter 7 case.

More importantly, a Chapter 13 case can significantly reduce your unsecured debt payments.  For instance, if you have $30,000 of credit card debt, you are likely required to pay more than $800/monthly in interest charges as a minimum payment.

In Chapter 13, it is possible to reduce your burden significantly, and make principal-only payments for your credit cards.  In a minimum payout plan (eligibility determined by assets-owned and monthly income), you would be required to pay around $50/monthly for that same $30,000 credit card debt.  This would be a plan to eliminate your credit card debt, not just pay the interest charge.

As you can see, this makes a huge difference for wage earners and their budgets.  An experienced bankruptcy attorney can explain your options.  Other considerations, such as administrative costs (attorney and trustee fees), must be taken into account as well.  In order to determine what your monthly payments would be in Chapter 13, please contact me for a free bankruptcy consultation.

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