100% payback

[sophie]

Ok. I'll ask the question here and maybe someone will know the answer.

From what I'm reading the payment plan may be that you will have to pay 100% of the debt back, is this correct?

If it is, why would you want to file bk if you have to pay it all back anyway?

I don't know if there is a difference if you have all unsecured debt vs. secured but for my question it's all unsecured.

Hope someone knows the answer to this! Thanks so much!

[miss puff]

i am just curious, is there a table that you figure out a 100% payback for with income vs total debt divided by however many years?

[arkienurse]

If it is, why would you want to file bk if you have to pay it all back anyway?

I don't know if there is a difference if you have all unsecured debt vs. secured but for my question it's all unsecured.

Hope someone knows the answer to this! Thanks so much!

I can give you details on my case. We are in a 100% payback plan, mostly unsecured. My husband had something bad hit his credit report. The next month when his citicard bill came, the 150 we had paid the previous month was not even enough to cover the new finance charges. His interest rate went from something around 10% to the maximum % rate. And it just snowballed. All of his credit cards raised the interest rate, which drastically raised the payment, so that we were just barely covering the minimums, nothing to paydown the principle. And then, in the struggle to cover his increased payments, one of my cards was paid late, which started the snowball on my cc's. I didn't even have the money left to really buy basic groceries, or school clothes for the kids.
Filing CH13, even though we are still paying 100% of what we owed, STOPPED the interest on the Credit cards. What we owed on the day we filed is what they will get, not a penny of interest has accumulated in the 2 years since we filed. Just think of how much interest they would have collected over the past 2 years, with all of our cards at the max interest rate.
We still paid interest on our auto loans, but my van actually was less interest through the bk than we had been paying to the creditor, so they got less money than they would have.
Hope this helps you understand why someone would agree to a 100% payback rather than just paying the creditors.

[sophie]

Thank you so much! That helped tremendously!

All our debt is cc's and we've never been late. Of course I took out cash advanced constantly to keep up with the min. payments. However all of our cc's have a very low (2 &3% interest) rate and even at that our min. payments would be like 2500/mo which we can't pay. So even if we have to pay back 100%, it would be a lower payment and no interest for 5 years right?

[arkienurse]

Thank you so much! That helped tremendously!

All our debt is cc's and we've never been late. Of course I took out cash advanced constantly to keep up with the min. payments. However all of our cc's have a very low (2 &3% interest) rate and even at that our min. payments would be like 2500/mo which we can't pay. So even if we have to pay back 100%, it would be a lower payment and no interest for 5 years right?

Umm, probably. I assume they still have to stop the interest with the new law. Payment amount depends on what your "disposable income" is determined to be. An initial interview with a lawyer could probably give you a ballpark amount of what you would have to pay every month. Just be sure to know exactly what you are allowed to claim for the different areas of your budget, and don't forget to include the little once a year things, like auto tags, house insurance, property tax, home owner assoc. fees, etc.

[13inOR]

We had a 100% plan, all of secured and unsecured. In our case it was well worth it because we did it to save our house from foreclosure. We had enough to pay everything by then, just needed to buy some time. It was not cc debt at all.

[lrprn]

i am just curious, is there a table that you figure out a 100% payback for with income vs total debt divided by however many years?

If there is, Miss Puff, I haven't been able to find it online. However, there are some formulas online for how to figure out how long it will take to pay back all your debts, but it includes both secured and unsecured debts. In Ch 13 you would only personally be paying back your secureds. To find these formulas, do a search for "bankruptcy debt formula" - that should bring a few of them up for you. HTH!