One of the many benefits of filing a chapter 13 bankruptcy case is the ability to repay creditors less than what’s owed in many cases. Some cases don’t require a full payment to unsecured creditors. This all depends upon the income and expenses of the debtor as well as the debtor’s ability to repay the entire debt over a three to five-year period. In most cases, however, unsecured creditors are paid less than what is owed and as little as 10%.
Once a chapter 13 bankruptcy case is filed, the clerk of U.S. Bankruptcy Court will send out a notice of filing to all the creditors listed on the debtor’s petition. There is a timeframe whereby creditors must file a proof of claim. A proof of claim is a document that basically sets out what is owed with documentation supporting that claim. If an unsecured creditor fails to file a claim, then their debt or claim may be eliminated if the debtor is able to complete the plan. Now there are some exceptions to this general rule. However, in most cases, an unsecured claim which is not filed is eliminated if the debtor completes the chapter 13 plan.
Many clients who come to see me want to know what percentage they are paying back to the unsecured creditors. The truth is that we really do not know what percentage is going to be paid back until a few different factors occur. The first of which is which creditors actually file a valid proof of claim. Secondly, we need to get the case confirmed by the court with a specific percentage provided. This is something that is negotiated and often takes several months to finalize. Lastly, we technically have to wait to the end of the case to see if the debtor completes the chapter 13 to determine whether or not on unfilee, unsecured creditors debts are eliminated. When we review all of this in its totality, it is then that we are able to determine what actual percentage was paid back to the general unsecured creditors.
Chapter 13 is a complicated case. It is not simple to just quote a percentage or quote specific facts at the outset of a case. It is not until the case is underway, whereby the debtor’s attorney will be able to advise properly on what percentage is being paid back, how long the plan is going to last and which creditors did not file valid proofs of claim. For more information about chapter 13 bankruptcy and how your unsecured creditors can be treated, please contact the office at 847-520-8100. We have offices in Chicago, Westchester, wheeling, Aurora, Joliet and Waukegan.
