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Understanding how debts are organized in a chapter 13 bankruptcy

Filing for chapter 13 bankruptcy in Illinois gives you the ability to pay off creditors under more manageable circumstances. At Ledford, Wu & Borges, LLC, our team works with people like you so they can understand their options and know what to expect when filing for bankruptcy. When it comes to chapter 13, you should be aware of how your debts will be organized because if affects how much you will have to pay.

As the U.S. Courts points out, there are three categories in which each of your debts may fall, and those are the following: 

  •        Priority: These include payments such as child support, most taxes and alimony.
  •        Secured: These are the debts for which a creditor has a right to take back property, such as your home or car.
  •        Unsecured: These are items in which creditors do not have a right to property, such as credit card debt.

The U.S. Courts notes that in your chapter 13 repayment plan, you will be responsible for paying all of your priority debts in full. If you wish to keep your assets, you will have to pay either the total value of property in secured debt or the total value of the debt, depending on the circumstances.

When it comes to unsecured debt, you may not have to pay the full amount. There are several factors that will determine how much of this debt you will need to pay. Your monthly income and the length of your repayment plan, for example, will dictate how much you will owe on these debts.

For more information on this topic, please visit our page regarding repayment plans.

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