The Jones family has two automobiles on which they owe a total of $15,000.00.  The vehicles have a combined value of $10,000.00.  They also have credit card debts, finance company loans, and medical bills totaling  $9,000.00.  Currently, their monthly payments on the vehicles ($550.00 per month) and other debts total $1,000.00 per month. They can't seem to make ends meet and are consistently falling behind in their payments.  How can a Chapter 13 help them?

In the example above, based on their monthly living expenses and their income, the Jones family can only afford to pay $400.00 per month.  A proposed 70% plan would pay unsecured creditors 70% of the total amount owed, but pay the automobile value in full, with interest.  The plan payments could be reduced even lower by paying the unsecured creditors a smaller percentage.  In the example above, a payment of 40% to unsecured creditors would result in a plan payment of approximately $330.00 per month for 60 months.  In each example, the value of the automobiles is paid in full but the $5,000 excess debt on the vehicles is treated as unsecured debt. If the vehicles are worth less than $10,000.00, then the payments would be even less.

Bottom line:  If the Jones file a Chapter 13 plan, their monthly payment for all of their debts would be less than what they are currently paying for just their cars!