How much do you have to repay creditors in a chapter 13 bankruptcy?

How much do you have to repay creditors in a chapter 13 bankruptcy?

Attorney Tom Olsen: If they were required to go into a Chapter 13 because they earn too much money, for example, would the Chapter 13-- Would that bankruptcy judge have to say or have the ability to say, "Okay, I know there's a judgment against you for $50,000, I've got me as a bankruptcy judge have the ability to work it out to where you only pay $10,000 of that $50,000?"

Attorney Paul Urich: The way the Chapter 13 works is that the payment is based on whatever secured creditors like a house and car have to be paid, and then the unsecured creditors like the credit cards and the judgment holder, they get paid out of whatever disposable income is left after necessary and reasonable living expenses. It's kind of like a five-year debt repayment plan backed up with protection by the federal government.

The creditors, they have to cease all contact and more collection efforts, and at the end of the five years, your house is paid down to where it would have been had you been paying on it. Car gets paid off unless it survives the plan, depends on what's going on there, and you are debt-free otherwise.

Attorney Tom Olsen: Again, at the end of that five years you may not have necessarily paid that entire $50,000 judgment off, just a portion of it, but it's still declared to be paid in full?

Attorney Paul Urich: Yes, and it also depends on the jurisdiction. Here in Orlando they have best efforts of the debtor, and if it turns out to be a 0% plan, that's what it is. I believe at Tampa they have like a 20% minimum, and other jurisdictions have other thresholds. Under no circumstances do you have to pay more than the amount of all the claims filed.

Attorney Tom Olsen: Hey, folks. My name is Tom Olsen. The name of the show is Olsen on Law. We're taking any and all legal questions today, but we would love to have your bankruptcy legal question in particular. My guest today is attorney Paul Urich. He's a bankruptcy attorney here to lend us his expertise.