But I want to pay my debts….I just can’t do it at credit card interest rates.
What you want, then, is Chapter 13.
If the credit card company won’t agree to an interest rate that you can handle, you can impose a Chapter 13 repayment plan on them with the help of the bankruptcy court.
The creditor doesn’t have to agree.
You don’t have to negotiate.
And the bankruptcy judge will enforce the Chapter 13 plan you propose and the court confirms.
Chapter 13 works like this: you, the debtor, stay in possession of your assets. You commit to a payment plan that has to meet certain standards in the bankruptcy law.
- Your creditors have to get as much in payments as they would in Chapter 7
- Your payments have to be your best effort at repayment-according to formula
- Your plan has to pay any delinquent family support or taxes in full
Beyond that, you have lots of freedom to propose plan terms.
Your plan may pay all your creditors back in full, every penny. So you can repay the debt, without interest or at the federal judgment rate of interest. That rate, today, is tiny.
Or your Chapter 13 plan can repay creditors a fraction of their debt, depending on the value of your non-exempt assets and the application of the means test to your income.
13 beats debt settlement
The ads for debt settlement companies speak to the desire of almost everyone to repay their debts if they can.
They make a compelling pitch to honor your commitments.
What they can’t offer is the power of the bankruptcy court to make all creditors go along with the plan. They can’t keep the uncooperative creditors from suing you. And they can’t provide the flexibility of Chapter 13 to change the terms of the plan if life intervenes.
Debt settlement companies skirt Kansas laws protecting consumers.
Consider Chapter 13, then, if you have the grit and the ability to repay your debts in full, with a little help from the bankruptcy judge.
Cathy Moran helps individuals and small businesses in Silicon Valley with their bankruptcy issues. She can be found on Google+ and on Consumer Ledger, where she shares information about consumer protection and personal finance.
