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How To Pay Off Credit Card Debt In A Chapter 13 Bankruptcy And Save Thousands Of Dollars?

Robert J. Adams and Associates Oct. 2, 2019

With large credit card and other unsecured debts, Chapter 7 is the best option.

But, sometimes Chapter 7 is not available to you. Or, Chapter 13 is the best option: like saving your car or your house.

People ask how much they have to pay their credit card bill in Chapter 13.

Chapter 13 plan propose a “dividend” to unsecured creditors. The dividend is the percentage that unsecured creditors will get.

A plan with a 10% dividends means the unsecured creditors will get ten cents of the dollar of its filed claim. If the unsecured filed claims are $30,000 the creditors will get $3,000 over the life of the Chapter 13 plan. A dividend of 100% means creditors with filed claims will get 100%.

There are generally three (3) situations:

  1. For most clients the dividend to unsecured creditors is 10%;

  2. For some “high earner” individuals a Chapter 13 plan was to go 60 months. The dividend is often (but not always) higher than 10%. And, sometimes even 100%.

  3. And, for some who have large assets, the dividend will be higher than 10%. For most folks, it is when they own a house with a lot of equity.For most then listing $30,000 with a 10% dividend the savings is $27,000.

For “high earner” $30,000 is paid in total. But, the contract interest stops. I have had many clients in this situation. They are relieved. The Chapter 13 payment is less than what they were paying before. And, there is only payment. And, they don’t have the hassle of dealing with collections of people, lawsuits, and garnishments.

For folks with large equity they may well have to pay the unsecured creditors 100%.: and, with interest of about 4%. The repayment is still less than the contract payments. Credit cards can be as high as 39%.

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