Behind Chapter 13
Depending on the type of debt you hold, it may be preferable to file for Chapter 13 bankruptcy in the beginning. Even if you file for Chapter 13, there is no assurance that you will be required to repay all of your debts. The court considers a number of factors when determining how much you will be required to repay and which creditors will receive payment.
In fact, not every creditor has the opportunity to be repaid under Chapter 13. The reason for this is that the court prioritizes creditors based on the type of debt owed and the presence or absence of an asset or collateral held against the debt. For instance, mortgages and auto loans have a higher priority than credit card and medical debt because both are secured by collateral, whereas credit card and medical debt are unsecured. Because secured debts are riskier due to the possibility of asset liquidation or repossession, they are given the highest priority in a Chapter 13 case.
Against Unsecured Repayment
Not only do secured obligations have priority in a Chapter 13 case, but they also have specific repayment guidelines. In order to retain ownership of the asset, the debtor must repay the debt. However, this does not imply that debts are always repaid in full. In determining the quantity of the repayment, the property's value is crucial. If the asset's value is less than the debt owed, the court may waive the difference and only require repayment of the asset's value. The interest rate is also significant, as the court may adjust the amount owed based on the rate. The court can suspend or reduce the debt's interest rate, thereby reducing the debtor's repayment costs. Nonetheless, if the court determines that the creditor is owed more money for the delinquent debt, the rate may be maintained or increased.
Unsecured obligations are handled significantly differently. If a creditor is to be paid anything through Chapter 13, the amount is typically much less than if the debtor had not filed for bankruptcy. The court calculates the potential for repayment based on the debtor's disposable income, or the amount of income remaining after basic living expenses have been deducted. Even someone who was ineligible for Chapter 7 may discover that their Chapter 13 income is insufficient to repay unsecured creditors.
" - https://www.affordablecebu.com/
