When I File My Chapter 13, I heard that no one gets paid. If this is true, then how can it save my home?
Chapter 7 bankruptcy provides immediate relief to the debtor by discharging a large portion of the debts they owe. Conversely, a Chapter 13 bankruptcy operates more as a debt reorganization and repayment plan so that you can pay your debts off within 5 years. Be aware of the fact that this is a court approved and sanctioned plan and you must stick with it throughout its duration. If you are wondering whether your creditors will get paid once you file your Chapter 13, the answer is “yes they will.” However, some will be paid before others and others may not get paid in full.
Under the guidelines of Chapter 13 of the US Bankruptcy Code, creditors who are categorized in the same class will all be repaid at the same rate. There are basically 3 classifications of creditors where Chapter 13 is concerned:
Priority creditors – certain claims regarding salary, child support payments, and tax debt are classified as priority creditors.
Secured creditors – car loans, furniture and jewelry loans, judgment creditors (those creditors whose claims have been secured with property), and mortgage lenders fall under this category.
Unsecured creditors – signature loans, medical providers, and credit card lenders are grouped into this classification.
Those entities listed as priority creditors will be the first ones to get repaid and they are typically repaid in full. Secured creditors will either be paid back in full or at least an amount that is equal to the value of the collateral used to secure the loan. Unsecured creditors are normally repaid at a rate of one to 10 cents on the dollar, but that will depend on a number of different factors. The order of repayment goes in the following order:
- secured creditors
- unsecured creditors
- priority creditors
Just remember that no two creditors are alike and your attorney will know how to guide you through each step of the Chapter 13 process.
Additionally, special treatment may be offered to specific creditors such as credit card companies where there is a co-signer on the account and student loans. Whether you are located in Orlando or the mid-Florida region, and are going through the Florida foreclosure process, Clark & Washington has an Orlando Bankruptcy Attorney that is experienced at handling any Chapter 13 bankruptcy case.
If you live in the Orlando area or mid-Florida, Clark & Washington is Mid-Florida’s largest bankruptcy filer and has years of experiencing assisting individuals with Florida foreclosure proceedings. Please feel free to contact us today at (407) 898-0299 or fill out the confidential contact form found on this website.
