How Is the Chapter 13 Bankruptcy Repayment Plan Determined?
When struggling with overwhelming debt, one of the options that may offer relief is filing for bankruptcy. One of the types of bankruptcies that individuals can file is Chapter 13 bankruptcy. Chapter 13 bankruptcy allows debtors to restructure their debts and create a manageable repayment plan while keeping their assets. Usually, with Chapter 13 bankruptcy, debtors have three to five years to repay their priority, secured and unsecured debts. Once the debtor completes the repayment plan, the bankruptcy case is discharged, and they are no longer liable for remaining dischargeable debts. One of the crucial aspects of a Chapter 13 bankruptcy is the repayment plan. It is vital for anyone considering filing a Chapter 13 bankruptcy to understand how this plan is determined or created. This article discusses how the Chapter 13 bankruptcy plan is determined.
Determining the Chapter 13 Bankruptcy Repayment Plan
Chapter 13 repayment plans are tailored to each debtor’s unique situation. No calculator can produce an accurate estimate of what your monthly payments will be. With this in mind, it is vital that if you use an online Chapter 13 calculator, you take the results with a grain of salt. You should speak to a qualified bankruptcy lawyer for a reliable, personalized assessment of your case.
While it is impossible to accurately estimate the amount you will need to pay each month after filing a Chapter 13 bankruptcy, it is possible to explain the general process of creating a repayment plan. The first step is to determine your income. The bankruptcy court considers your income from the six months before your bankruptcy filing. To file a Chapter 13 bankruptcy, you need regular, predictable monthly income. However, it is okay if your income varies, as your monthly payments can vary if your income fluctuates.
After determining your income, you need to determine your disposable income. Disposable income is the amount of money that remains after deducting necessary living expenses from your monthly income. Necessary living expenses include healthcare, food, utilities, housing costs, and insurance premiums. A Chapter 13 repayment plan leaves you room to pay off your debtors while still meeting your daily needs.
The next step in determining your monthly payment amount is your debts. Priority debts must be paid in full through the Chapter 13 repayment plan. Priority debts include domestic support obligations, such as child support and alimony, certain taxes, and unpaid wages. When it comes to secured debts, you need to think about what property you wish to keep. Secured debts must be paid in full if you want to keep the asset pledged as security for the loan. This may include secured payments that you have missed, such as mortgage payments and vehicle loans, to pay off the arrears inside your repayment plan. The last category of debt in your repayment plan is unsecured debt. These are things like medical bills, credit cards, and personal loans. For unsecured debts, you must pay at least the amount your creditors would have gotten had you filed a Chapter 7 bankruptcy case.
Finally, creating a Chapter 13 repayment plan requires determining the plan’s duration. You need to make payments for, at most, five years. Generally, the longer your plan, the lower your monthly payments can be since they will spread over a longer period.
Contact a Lehighton & Carbon County Bankruptcy Attorney Today
If you are considering filing a Chapter 13 bankruptcy in Pennsylvania, contact our qualified Lehighton & Carbon County bankruptcy attorney at Adam R. Weaver, Esq., for an honest assessment of your case.
Source:
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics
