Chapter 13 Bankruptcy Payments
When you file Chapter 13 bankruptcy in Atlanta, Georgia, you pay the Chapter 13 bankruptcy trustee one consolidated monthly payment for most of your debts. Chapter 13 bankruptcy is distinct from a Chapter 7 bankruptcy in that it allows the filer to reorganize debt and repay a portion of that debt (or sometimes all of it) under what is known as a Chapter 13 Plan. At the end of the Plan’s term (a maximum of sixty months), the debt will be officially discharged by the court. There is often some confusion among filers regarding the mechanics of exactly how repayment occurs. The payment is actually simplified because you make one payment to all of your creditors, except for your mortgage creditor.
How Do Chapter 13 Payment Plans Work?
In a Georgia Chapter 13 bankruptcy case, your first monthly payment is due 30 days after you file your 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.
If you are not paying back your unsecured creditors at 100%, then you will have to pay your tax refunds into the case every year. Over the course of such a long period of time, many issues come up that may cause you to have to go back to court. While you’re in Chapter 13, you are not allowed to incur new debt or sell property without court approval.
How Do I Know Where My Payments Are Going?
If you file Chapter 13 bankruptcy in Georgia, you will have access to a website that shows the Chapter 13 trustee’s disbursement of your payments to creditors. There, you will see that creditors are paid according to their statuses. Creditors such as mortgage companies and car creditors receive payments first. Tax creditors and domestic creditors seeking child support or alimony are next in line. Last in line are unsecured creditors, which usually consist of credit cards, medical bills, and utility bills.
Do I Still Have to Send Each of my Creditors a Check Each Month?
The general answer is no. When you file Chapter 13 you pay:
- One consolidated payment to a bankruptcy trustee for all debts, including your car payment;
- Your regular monthly mortgage payment;
- Your student loans; and,
- Your regular food, utilities, gas, and insurance expenses.
What Does the Bankruptcy Trustee do With my Payment?
The Chapter 13 Trustee takes the money you send to him or her and pays your creditors along the guidelines set forth in your Chapter 13 Plan. Creditors may be paid in full or be paid a pro rata share depending on the type of debt and the specifics of your individual Chapter 13 Plan. It is very important once you file Chapter 13 to make your plan payments to the Bankruptcy Trustee on time. Failure to do so can jeopardize your plan’s confirmation as well as your bankruptcy in general.
If you are considering filing for bankruptcy please consult an experienced bankruptcy attorney. For a free initial consultation please contact CMC Law at 404.585.0040.