If you are planning to file a personal bankruptcy, you are probably considering either a Chapter 7 or Chapter 13 case. As a general rule, if your monthly income is lower than your monthly expenses, you likely qualify for a Chapter 7 case. However, in addition to other factors, if your monthly income exceeds your monthly expenses, you may want to consider a Chapter 13. To learn more about Chapter 7, please read our blog titled “How Chapter 7 Bankruptcy Can Benefit You.” This blog will focus on Chapter 13 filings and the most common question individuals ask which is how much they will have to pay in their Chapter 13 repayment plan.
A Chapter 13 debtor must submit a plan of reorganization for approval by the court. The Chapter 13 plan outlines how you intend to pay your creditors, partially or fully. Most unsecured debts, such as your credit cards or medical bills, are paid a small percentage (if anything) of what is owed. If your income falls below the median income for a household of your size, the plan will last for a period of three years. If your household income is more than the median income for a household of your size, the plan can last for up to five years. Your monthly plan payment during your Chapter 13 case is based upon your “disposable income,” which is the amount you have left after you have paid your necessary living expenses.
When calculating how much disposable income you have to pay into your Chapter 13 plan, you are allowed to deduct certain expenses. Standards set by the Internal Revenue Service are used for some categories of expenses. You must also consider any non-exempt assets you decide to keep. Your unsecured creditors must receive at least as much as they would have received if you had filed a Chapter 7, so you may have to pay the value of your non-exempt assets to you unsecured creditors under the repayment plan, as opposed to your monthly disposable income.
We know it is confusing to understand how your finances will be handled in a Chapter 13 bankruptcy, so we will walk you through the process step by step. Before you file your case, you will have a clear understanding of what to expect in your Chapter 13.
We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..