How does intrest work on chapter 13???

[253BK]

Does it stop on all loans to allow you to complete your payoff sooner??? Overall might save a person thousands of dollars!

What happened to you when you filed chap 13

[lrprn]

Does it stop on all loans to allow you to complete your payoff sooner??? Overall might save a person thousands of dollars! What happened to you when you filed chap 13

When you file Ch 13, on filing day what you owe on each of your non-secured debts (primarily credit cards and unsecured loans) is frozen. No more interest, penalties, or late fees can be charged as long as your case is active.

Interest rates on secured loans freeze as of filing day as well. During Ch 13, secured asset interest continues to accrue and you or your trustee continues making payments on these assets as promised in your plan. SEcured creditors can continue to charge late fees if you make payments late. Also late payments open the door to a secured creditor asking the court to lift your automatic stay and foreclose or repossess your asset.

Only the non-secured creditors that file claims get money back through your Ch 13 plan. How much they eventually get back varies between 0% and 100%. Our plan pays our non-secured creditors 29% of the original debt - the rest will be wiped out if we successfully complete our Ch 13 plan.

Secured creditors have to file claims too, but they are paid what your loan agreement with the creditor states every month. Depending on your plan, you may make some or all of the payments for your secured assets or your trustee may make some or all of the payments. At the end of your plan, if you kept the asset, you owe whatever is left on the secured loan.

Bad news to share though....if you pay less interest to one creditor, surrender an asset so you don't make payments on that asset any longer, etc, the extra money is simply divided up evenly between the rest of the creditors by your trustee. Your plan isn't shortened at all unless you can pay off all your creditors who filed claims at 100%. Welcome to Ch 13 reality . Most trustees will not allow an early buyout of your Ch 13 plan until after 2 problem-free years on a 3 year plan, or 3 problem-free years on a 5 year plan either.

The one odd duck in Ch 13 are student loans. They are considered unsecured, but 99.9% of the time they are not dischargeable in bk. Student loan lenders are allowed to charge interest during Ch 13 as well. Some trustees allow 13ers to make payments on their student loans while they are in Ch 13, but many don't. The student loans are put in forebearance, but the interest continues to mount over the entire life of your Ch 13 plan. That can add a considerable amount to what you owe after 5 years

Nothing is mentioned in the current bk law about how student loans are to be handled in Ch 13 - it's an inconsistent mess from trustee to trustee and court to court across the US. We're stuck in this black hole with $22K of Parent Plus loans - hope you avoid the trap.

[woeisme]

Are you sure interest stops once you file CH 13? I filed in September, and in the paperwork it says my interest rate is 7% to my unsecured debts, not that it really matters since I'm not in 100% payback anyhow (65%) so the principle isn't being fully paid, let alone the interest, so I guess they could put any number they want as the interest amount, doesn't change my payment a bit, just the % payback. But I distinctly remember reading that the interest rate was 7%, because I had also always thought the interest stopped once you filed, and I know that's not the trustee payment percent (his is 3.9%, which I also remember because it's incredibly low compared to almost every other district that i've ever heard of). So I wonder if that's one of the other weird things in CH 13 that varies from district to district, the interest rate? There are so many vagarities in Bk based on where you live and the trustee assigned that I don't know how it can even be legal since there is so much unequal treatment...

[chpxiii]

The one odd duck in Ch 13 are student loans. They are considered unsecured, but 99.9% of the time they are not dischargeable in bk. Student loan lenders are allowed to charge interest during Ch 13 as well. Some trustees allow 13ers to make payments on their student loans while they are in Ch 13, but many don't. The student loans are put in forebearance, but the interest continues to mount over the entire life of your Ch 13 plan. That can add a considerable amount to what you owe after 5 years

This is my situation. Sometime this week I'll be calling Sallie Mae. *sigh* Not looking forward to THAT number.

[MajorMike]

Luckily we can pay our student loans while in 13

[lrprn]

Are you sure interest stops once you file CH 13?

Pretty sure. Did some searching online and found multiple lawyer websites that state that interest stops on unsecured debts the moment you file Ch 13.

I understand about paying interest on secured loans during Ch 13, but don't understand why you would be charged 7% interest for unsecured debts unless they are student loans.

If you don't mind sharing, what kind of unsecured debts are you being charged interest on?

[MajorMike]

They are still going to charge us interest on our secured auto though. Why is that?

[lrprn]

They are still going to charge us interest on our secured auto though. Why is that?

Secured loans are allowed to continue charging interest during Ch 13. You'll have to ask the 2005 Congress and the bk court judges who agreed that it's appropriate to charge interest for vehicle loans during Ch 13 why it's that way.