Chapter 13 Bankruptcy

What is a Chapter 13 Bankruptcy?

A chapter 13 bankruptcy is a repayment of your debt.  You are appointed a trustee and you make payments to that trustee. They will disburse the funds to your creditors.  This does not include your mortgage payment.  You mortgage payment will still need to be paid directly to the mortgage company, on time, every time.   The trustee payment normally includes mortgage arrears (what you are behind on the mortgage including late fees, interest, escrow shortage, creditor’s attorney fees, and any other fees with the mortgage prior to filing), car payments, child support arrears (only what you are behind), taxes, furniture payments if financed (not if a lease), jewelery payments and all unsecured debts.  You usually get to keep your property and no fear of losing your property to the trustee.

How is a Chapter 13 plan payment calculated?

Chapter 13 plan payments are generally based on three factors-

  1. How much you owe.
  2. How much you make.
  3. Equity in your assets.

The majority of chapter 13 plan payments are based on how much you owe.  Typically with the unsecured creditors receiving a low percentage of their debt.  Secured debt and priority debt must be paid in full.   If you do not make enough to fund a plan based on your debt, then you must consider abandoning an asset or finding other sources of income.  All income is considered in determining your plan payment including non taxable income such as VA benefits and social security.  If you are married, then you must include both spouse’s income regardless if only one of you file bankruptcy.  If  you make too much money, then you will have to pay your disposable income into the plan.  This means if after we take out your expenses from your net income, if there is any money left over, it must be paid into the plan.  Plan payments must account for any equity in your property minus exemptions.

Example: I have a car that is worth $10,000 and is completely paid for.  I am entitled to a car exemption of $5,000. Therefore, you have equity of $5,000 that must be covered in the plan. The trustee will need $5,000 over the life of the plan, typically 60 months (5 years).  This is approximately $84 a month that needs to be covered in the plan. Bankruptcy plan payments include the remainder of attorney fees and the trustee’s percentage for administering the case.

 

If you would like to learn more about filing a Chapter 13 Bankruptcy contact Colleen Brunson at Brunson Law LLC today.