A Chapter 13 bankruptcy is often utilized for debtors in Georgia to keep their homes and cars when they are behind on the payments. Chapter 13 is a form of bankruptcy that consolidates your debt into a payment plan based on your current disposable income and reasonable expenses. The Chapter 13 payments are made over the course of three to five years and must be approved by the court. Chapter 13 is a good option for debtors who are in arrears with their houses and cars and would like to consolidate the arrearages into a monthly payment. A debtor in a Chapter 13 may pay back anywhere from 0% to 100% of his or her unsecured debts, depending on the amount of disposable income he or she has at the end of each month. The means test applies in a Chapter 13 to determine how much disposable income a debtor has based on the debtor’s household income compared to the median income for a family of the same size in Georgia.
In a Georgia Chapter 13 bankruptcy case, you make one monthly payment to the Chapter 13 trustee, and the trustee disburses the funds to your creditors. You do not have to make a separate car payment to your car creditor, but you are required to make all of your mortgage payments that are due after the date of filing directly to your mortgage company in order to keep your house. However, if you are behind on your mortgage, the mortgage arrears are included in your monthly payment to the Chapter 13 trustee. Even after you file a Chapter 13, you can work with your mortgage company on a loan modification to possibly lower your monthly mortgage payments going forward.
Interest Rates in Chapter 13 Bankruptcy
Many times, you can lower the interest rate or even the balance on your car note in a Chapter 13. Bankruptcy law allows you to pay the fair market value of a car if you purchased the car more than 910 days before you file bankruptcy. Even if you purchased your car less than 910 days before filing bankruptcy, you can pay your car creditor a lower interest rate than the interest rate that you were paying before filing bankruptcy. Georgia bankruptcy courts have allowed debtors to pay prime interest rate on the day of filing plus 2% as a reasonable interest rate to car creditors. Currently, that rate is approximately 5.25%.
Just as in a Chapter 7 case, you have to attend a 341 Meeting of Creditors in a Chapter 13 bankruptcy case. At the 341 meeting, the trustee normally asks questions aimed to see if your case is going to work for you and your creditors. There is a second hearing known as the confirmation hearing as well. At the confirmation hearing, the court decides whether your Chapter 13 is approved and can continue. You are also required to take a second credit counseling course before the end of your case. If you make all of your Chapter 13 payments, you will receive a close and discharge of your case at the end of the three or five year plan. If you have any further questions about filing Chapter 13 bankruptcy in Georgia to keep your car or home, please call The Law Offices of Betty Nguyen Davis at (404) 593-2620 or contact us on the web for a free consultation with a bankruptcy attorney in the Atlanta area.