Legal Question in Bankruptcy in Utah

Re: Chapter 13

Before you file visit with a non-profit credit counseling company such as Consumer Credit Counseling. They can help avoid bankruptcy in some cases. They will also help you with budgets and assembling data which you will need if you have to file.

Under chapter 13 you pay the secured creditors their regular contract amounts (unless you file a motion to amend a contract) and your regular alloted bills (rent, groceries, utilities etc) and the remainder is divided among your unsecured creditors for generally 3 years, unless they are paid in full in less than 3 years. In some cases you may want to take up to 5 years. The percent you pay can be as low as around 10% depending on your budget and secured creditors.

Re: Chapter 13

Short answer -- your attorney should be able to give you an accurate estimate of the percentage of the unsecured debts (credit cards) that you will propose to pay in your Chapter 13 case.

It sounds as if you should probably file under Chapter 7 rather than 13. I advise all my prospective clients that they should file under 7 in most situations. It is significantly less expensive and most people don't need to take advantage of the strategies that are a part of Chapter 13. Basically, if you are current on your house payment, current on your car payments, and you do not owe back taxes, you do not need to be in Chapter 13.

If you need or insist on filing under 13 your attorney will work with you on a strategy for a proposed plan of repayment for all your debts. The key test in terms of your specific situation will be gauging your monthly income and comparing this to your monthly expenses. A required part of any bankruptcy filing under Chapter 7 or 13 is a detailed list of your necessary monthly living expenses. This is an estimate however it should be relatively accurate. This monthly list would include such items as rent, car payments, food, utilities, etc. You would not include any payments of unsecured debts.

Basically, after subtracting your monthly expenses from your monthly net income your attorney can estimate your "disposable income" and from this he/she will have a good idea of the amount of money you have leftover to pay unsecured debts (i.e. credit cards). The Bankruptcy Code requires that essentially all unsecured debts must be treated equally. Therefore the percentage each credit card will receive in the proposed plan will be the same. As an example all unsecured creditors might received 5% or maybe 20%. My experience tells me that the majority of Chapter 13 cases PAY 0% TO UNSECURED CREDITORS. This is because most filers have very little if any disposable income. Ph. (800) 303-0720