How Are Monthly Payments Calculated in a Chapter 13 Repayment Plan?

 Posted on May 29, 2020 in Chapter 13

Being unable to meet your monthly debt obligations can be a serious source of stress. Many people in this situation turn to bankruptcy as a possible solution. For some people who have a steady income, a Chapter 13 repayment plan may be the best option. Often referred to as the “wage earner’s plan,” this type of bankruptcy allows individuals to repay all or a portion of their debts over a period of three or five years. Each month, a single payment is made to the bankruptcy trustee, who then distributes the appropriate amount to each creditor.

Chapter 13 bankruptcies are popular with individuals who have secured debt attached to certain items that they want to keep, like a house or a car. This is because a Chapter 13 bankruptcy allows individuals to distribute any past due payments into the repayment plan so they can get caught up. While the draw of a Chapter 13 bankruptcy is present, most peoples’ first question is, “How much will my payments be?”

Factors Affecting Your Payment

When you enter into a Chapter 13 repayment plan, you agree to pay a specified monthly amount to your trustee who will then pay your creditors. Your monthly payment amount depends on a variety of factors including your income, expenses, the amount of debt you owe, the types of debt you have, and the value of your property.

• Income and expenses: Two of the biggest factors that affect the amount of your monthly payment are your income and your expenses. You must have a steady and reliable income to qualify for a Chapter 13 plan and provide the bankruptcy court with a record of your income from the past six months. You must also supply the court with your actual monthly expenses.
• Amount of disposable income: Once you have your income and your expenses, your expenses will be subtracted from your income. The amount that remains is considered to be your disposable income. For many people, the amount of their disposable income is usually the amount that their payments are based on.
• Value of Non-Exempt Assets: If you have assets that you want to keep, rather than liquidate, you have to factor in that cost as well. For example, a mortgage or a car payment would be added to your monthly payment amount. You also must factor in the amount of any other non-exempt assets that creditors would have received if you had filed for a Chapter 7 bankruptcy.

A San Antonio, TX Chapter 13 Bankruptcy Lawyer Can Walk You Through the Calculations

Bankruptcy can be confusing, no matter which process you choose. During a Chapter 13 bankruptcy, your monthly calculations will likely be calculated using a computer, but a skilled Boerne, TX Chapter 13 bankruptcy attorney can guide you through the process. At the Law Offices of Chance M. McGhee, we have been helping clients file for bankruptcy for more than 18 years. To schedule your free consultation, call our office today at 210-342-3400.

Sources:

https://www.thebalance.com/how-much-will-my-chapter-13-plan-payment-be-316209

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics