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Repaying creditors under Chapter 13 bankruptcy

In a Chapter 13 bankruptcy, Kentucky debtors typically get to keep their possessions while adhering to a repayment plan that lasts either three or five years. There are many options for how this might work, and in one case a couple decided to give up their vehicle when modifying their plan.

Household debt hits record levels

An increasing number of people in Kentucky are carrying record amounts of debt, raising concerns that there may be an uptick in the number of bankruptcies that might be filed. The previous peak was at the start of the recession in the fall of 2008.

Reestablishing credit after bankruptcy

Kentucky residents who are struggling to pay their bills are sometimes reluctant to explore their debt relief options because they worry about what would happen to their credit ratings if they filed for personal bankruptcy. While discharged bankruptcies can remain on Experian, Equifax and TransUnion reports for up to 10 years, research suggests that they do not greatly affect credit scores or deter lenders. The financial services sector also has a number of borrowing options for available for consumers who are seeking to rebuild their credit ratings.

The effect of bankruptcy on credit scores

Kentucky residents sometimes continue to struggle financially because they worry that filing for bankruptcy will do irreparable harm to their credit ratings. While pursuing debt relief will have an impact on the credit scores handed out by companies like Equifax, Experian and Trans Union, the effects are not nearly as severe or long-lasting as many people believe.

How people might pay for bankruptcy

Kentucky consumers who are considering filing for bankruptcy may struggle with the cost of the process. Bankruptcy can cost as much as $1,500 or more, and people might use their tax refunds to pay for it. As a result, both March and April tend to show spikes for Chapter 7 bankruptcy filings.

Payment plan retirement funding rejected

Kentucky consumerswho are considering filing for Chapter 13 bankruptcy might be interested to learn that one couple's payment plan was rejected because too large a proportion of the plan was for the couple's retirement account. A Louisiana judge decided that the percentage in a payment plan that should go toward retirement is 3 percent although there might be exceptions to the amount in some cases.

Recent court ruling sides with mortgage lenders

Residents of Kentucky who are considering filing for chapter 13 protection should be aware of a recent ruling by the United States Court of Appeals for the Fourth Circuit. Typically, a chapter 13 debtor is prohibited from modifying a lender's claim that is only secured by his or her primary residence. In the recent decision, the Fourth Circuit ruled that a lender's additional interest was supplementary to the lender's lien on the borrower's residence and did not qualify as additional collateral that would give someone the leeway to modify the loan under chapter 13.

Auto loan cramdowns and bankruptcy

Kentucky residents who have substantial debts and are considering filing for Chapter 13 bankruptcy should know that if they enter the bankruptcy with a negative equity in a vehicle they have financed, they may be eligible for a loan cramdown. For those debtors who meet certain requirements, they may be able to save money on their auto loan. However, this applies only for a Chapter 13 bankruptcy. A loan cramdown is not an option for Chapter 7 bankruptcy filers.

The importance of paying off debt quickly in Kentucky

There are many advantages to paying off large debts sooner rather than later. One of the most beneficial aspects of paying off one's debt is that it cuts accrued overall interest. For instance, high-APR credit cards can be expensive because of accumulating interest over time. The more money that a person pays on a credit card debt, the sooner it can be paid off.

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