When taking out loans, it’s important to remember that borrowed money must be paid back – with interest. Being over-extended and facing large payments with high interest rates may have you considering if bankruptcy is an option. Filing bankruptcy won’t necessarily eliminate the payment of interest, but it may lessen it.
Money woes are stressful, and can impact every aspect of your life. Finding a solution is crucial, and attorney Adrienne Hines can help. She will listen to your specific circumstances, ask the right questions, and guide you to a solution. To schedule a free consultation of your case with a skilled Ohio bankruptcy lawyer, call Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA today at (419) 625-7770, or reach out through the online form.
The Basics of Bankruptcy
You may know a bit about bankruptcy, such as there are two common chapters for private citizens: Chapter 7 and Chapter 13. Under Chapter 7 bankruptcy, a trustee sells any nonexempt assets to pay creditors. Any remaining debts that aren’t reaffirmed are discharged at the end of the case. Chapter 7 is typically used for those with no assets or ability to repay their debts.
A filing under Chapter 13, on the other hand, requires debtors to follow a repayment plan. It is often called the “wage earner’s plan,” because it helps those with a regular income to consolidate their debts and submit one monthly payment to the trustee over a term of three to five years. During this time, creditors are barred from contacting you about the debt.
Understanding Chapter 13 Bankruptcy Interest Rates
What about interest during a Chapter 13 bankruptcy? Debts under Chapter 13 will still accrue interest, but through the plan it is often less than what was originally being paid on certain loans. The U.S. Bankruptcy Court of Northern Ohio has set the presumptive Chapter 13 bankruptcy interest rates for personal property secured claims (such as a car) at prime rate plus two percent. The current prime rate is 5.5 percent, so the Chapter 13 bankruptcy interest rate would be 7.5 percent.
What does that mean to you? It could result in savings if you had higher interest on some of your loans, such as with credit cards. Debt related to credit cards, medical bills, or utilities is called unsecured debts because there are no assets tied to them. This unsecured debt will not accrue interest. Under a Chapter 13 plan, you may only pay a portion of this debt, and your plan will establish the interest rate.
You may also pay less interest on secured claims, if the debt is one that will be paid off during the life of the bankruptcy plan. In that case, the Chapter 13 bankruptcy interest rate will apply. There are different rules for “ongoing debt” that you may reaffirm, and which will extend past the life of the bankruptcy. Mortgages and car loans are examples. The interest on car loans is capped. For ongoing debt, the plan interest rate applies during the term of your agreement, but what rate is charged after the plan terminates should be negotiated with the help a skilled attorney.
Start Rebuilding Your Financial Future Today
A bad investment, a lost job, a serious illness, or even reckless spending could result in needing to file Chapter 7 or 13 bankruptcy. By facing your financial issues and taking advantage of bankruptcy law, you can have a fresh start. Attorney Adrienne Hines has helped many people considering bankruptcy, and she’s prepared to help you. Don’t wait another day to address this important matter. Contact Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA at (419) 625-7770 to schedule a free, initial evaluation of your case.