Tennessee residents who have gotten into debt may feel overwhelmed, as if there is no way out. Whether because of a period of unemployment, medical bills or other types of emergency expenses, anyone may find herself in such a situation. One possible solution in these cases is a bankruptcy filing. This space has previously discussed several types of bankruptcy petitions that can be filed depending upon what the debtor needs to accomplish. This time, we’ll take a quick look at the Chapter 13 process and the classes of creditors that may be involved.
Chapter 13 bankruptcy is often used when a debtor has an income, but can’t pay all the debts due. It can be used to slow or stop repossession of collateral, such as a car, or foreclosure of a home. The petition is filed with the proper court in Tennessee and is assigned to a trustee who will manage the case and act as the conduit for payments from the debtor to any creditors. Generally, when the debtor files a Chapter 13, he or she will present a proposed repayment plan for the court’s consideration.
But who gets repaid? There are three basic creditor types in Chapter 13 bankruptcy cases. The first is priority creditors. This category includes those who have claims with special status in the court, like a government that is owed taxes or the court itself who needs its filing fees. Priority claims must usually be paid in full unless the holder of the claim agrees otherwise. The second set of claims are those that are secured. Secured claims have some form of collateral that might be taken to satisfy the claim, such as a house in a mortgage situation, or a car if purchased with a loan. These claims usually need to be paid in at least the amount of the value of the property if the debtor wishes to retain the property, though debt incurred to purchase property within a certain time before the petition’s filing must be paid in full. Finally, there are unsecured claims, which are debts — such as credit card debt — not attached to any property. These claims do not necessarily have to be paid in full as long as the debtor is contributing his or her full disposable income over the time period of the payment plan.
As might be noted, some of these payments may not be simple to calculate. What is the value of certain secured claims that need to be paid, and how much disposable income does the debtor have, for example? Tennessee residents with questions about these parts of a Chapter 13 repayment plan may wish to consider contacting an experienced bankruptcy attorney.
