By filing for Chapter 13 bankruptcy, an Arkansas judge will put an automatic stay of creditor collection activity in place. Over a period of three or five years, you will make payments to your creditors in accordance to a plan that you create. However, there is a chance that you will be allowed to make payments to some creditors outside of this plan.
Secured loans may be paid directly to creditors
Let’s say that you have a car loan or owe money to a retailer that has agreed to offer a secured line of credit. In such a scenario, you may be allowed to make payments directly to the creditor per the terms of an agreement reached without the help or approval of a bankruptcy judge or trustee. However, this can only happen if no one objects to such an arrangement. It is important to note that you can still pay secured debts through a trustee as part of your proposed plan.
Mortgage payments may also be made outside of the plan
If you are behind on your mortgage, you must pay the past due amount as part of your payment plan. Furthermore, you will need to stay current on your loan throughout the repayment period. Typically, any amount that is in arrears will be paid through the trustee while ongoing payments can be made directly to your lender.
New debts are not part of a payment plan
During a Chapter 13 proceeding, you may be allowed to incur additional debt to purchase a car or maintain a basic standard of living. Generally speaking, the payments on these loans are handled outside of the repayment plan. If you convert your Chapter 13 case to a Chapter 7 case, these additional debt balances may eligible to be discharged.
If you are struggling to pay your bills, a Chapter 13 bankruptcy may help you get your finances in order. An attorney may be able to help you file for a reorganization bankruptcy or assist you in converting a Chapter 13 case to a Chapter 7 case.