If you're in debt, chances are you put a decent portion of your paycheck toward interest every month. Whether you're paying credit card companies, lenders, or a mortgage company, only a small amount of your monthly payment goes toward the principal.

One of the biggest benefits of Chapter 13 bankruptcy is that it gives you a break on interest. When all is said and done, you'll likely have paid far less in interest than you would have without it.

Considering Chapter 13? The Craig Black Law Firm can help. I work one-on-one with each client, taking every incoming call to address questions and concerns. If you're considering Chapter 13, contact me at 678-888-1778 or by completing this contact form.

The Chapter 13 Interest Freeze

When you file for Chapter 13 bankruptcy, your debts are frozen while you work through the repayment plan. During that time, your creditors can't come after you to make payments.

That freeze puts any interest you were accruing on hold, as well. By doing this, the courts free you up to focus on paying down your debt rather than putting a large chunk of your monthly payments toward interest.

Tax Debt Interest Savings

Credit cards and loans are considered non-priority debts in bankruptcy, so while they'll be part of your repayment plan, priority debts will come first. This often includes tax debt, which you'll work toward paying in full over the course of your plan.

But as with non-priority debts, new interest on your tax debt will be put on hold once you file. How tax debts are handled during bankruptcy depends on the individual circumstances behind your debt, but the interest will be frozen.

Cramdown Provisions and Chapter 13

If you have secured debt like car loans, the cramdown provision can help lower your interest. This provision lets you reduce the remaining principal of your loan to the current market value and then start making payments on that.

Interest on loans that were crammed down isn't handled the same as other types of interest. Under the cramdown provision, you pay interest at the till rate, which is calculated using the national prime rate plus 1 to 3 percent based on the level of risk.

Unsecured Loans and Credit Cards in Chapter 13

Credit card debt is considered non-priority in Chapter 13. That puts it behind secured loans and government debts in your repayment plan. As a result, you likely won't pay down the full amount, and the remainder will probably be discharged in the end, including any unpaid interest.

The same treatment applies to any loans that weren't secured by collateral. This includes student loans and some personal loans.

How We Can Help

The Craig Black Law Firm has extensive experience in Chapter 13 bankruptcy and can help you know what to expect. If you're considering filing for Chapter 13, give me a call today at 678-888-1778 or complete this contact form, and I'll be in touch.