How Is A Chapter 13 Plan Calculated? How Much Will I Pay Each Month to A Chapter 13 Trustee?
When a person considers filing a Chapter 13 case, how much is my Chapter 13 payment is one of the first questions asked during the free case review. However, that is not an easy question to answer during a free consultation. If your attorney is forthright and honest, he will explain that calculating a Chapter 13 repayment plan payment is complex, when you do it correctly.
Our Daytona bankruptcy lawyer takes the necessary time to analyze your financial situation and review bankruptcy laws related to Chapter 13 payments to calculate the lowest possible payment that he believes the court will approve. However, to do this, he must first prepare your bankruptcy schedules and spend time discussing your finances with you to ensure he has all relevant information to calculate a Chapter 13 plan payment.
How is a Chapter 13 Plan Payment Calculated?
When you file a Chapter 13 case, you must disclose all debts in your bankruptcy filings. Debts are placed into three categories:
• General Unsecured Debts — Creditors with general unsecured debts do not have collateral to secure the debt. Examples include personal loans, credit card bills, medical debts, and old utility bills.
• Priority Unsecured Debts — Some unsecured creditors have priority over other unsecured creditors. In a Chapter 13 case, this means that they will receive their payment before general unsecured creditors and they must be paid in full. Examples of priority unsecured debts include administrative fees, past due alimony, past due child support, and most taxes.
• Secured Debts — Creditors with secured debts hold a lien on collateral to “secure” the debt. Mortgages and car loans are the most common types of secured debts in a Chapter 13 case.
Debts are handled differently in a bankruptcy repayment plan based on their category. Therefore, calculating a plan payment is not as simple as taking the total of your debts (except your mortgage) and dividing by 60. Furthermore, some debtors may be able to reduce the amount owed on a car loan or strip away the lien of a second mortgage. If so, the amount owed as “secured” debt decreases. In addition, a portion of income taxes may be considered unsecured thereby decreasing the amount that has to be paid back in full.
All these factors complicate how a Chapter 13 plan payment is calculated. Therefore, before a bankruptcy attorney in Daytona begins to calculate your plan payment, he reviews all your debts to determine whether each debt must be paid in full or whether he can lower the amount that must be paid to that creditor.
After analyzing the debts, a bankruptcy attorney can begin to calculate the plan payment. A Chapter 13 plan payment includes:
• Priority debts that must be paid in full;
• Past due mortgage payments that must be paid in full;
• Car loans or other secured debts you want to pay in full through the Chapter 13;
• Administrative fees and interest on some debts; and,
• Percentage of debt paid to unsecured creditors.
Keep in mind that your Chapter 13 bankruptcy lawyer will attempt to lower the amount you must pay to release the lien on your vehicle and analyze whether you can get rid of your second mortgage by moving it to the unsecured debt category. These are extremely important factors that can decrease the amount you must pay each month to the Chapter 13 trustee. Experienced Daytona bankruptcy attorneys use their knowledge and expertise to look for all ways to lower a Chapter 13 payment as much as possible for their clients.
The Problem of Disposable Income and Nonexempt Assets
In addition to the above, your attorney must factor into the equation the amount of disposable income and nonexempt assets in your case. Your Chapter 13 Means Test determines the disposable income for your case. Disposable income is the amount of money you have left over after paying allowed living expenses and debts.
If you have disposable income after completing the Chapter 13 Means Test, this amount must be paid each month to the unsecured creditors, which could increase the percentage these creditors receive through your plan. Our attorneys work diligently to find every deduction allowed on the means test to decrease disposable income to keep a plan payment as low as possible.
One of the benefits of filing a Chapter 13 case is to protect nonexempt assets from being sold by a Chapter 7 trustee. However, the nonexempt equity in those assets factors into your bankruptcy plan payment. The amount of equity above the allowed exemption must be added to the amount paid to unsecured creditors, just like disposable income. Therefore, nonexempt equity in assets also increases the plan payment, but you can keep the property instead of losing it in a Chapter 7 case.
How Much Will I Have to Pay to a Chapter 13 Trustee?
As you can see from the above, calculating a Chapter 13 plan payment is not a simple matter. You may find Chapter 13 plan calculators online that claim to estimate your payment. However, these calculators cannot perform the thorough review and critical analysis of your debt to determine ways to lower your plan payment. You want a Daytona bankruptcy attorney who has a comprehensive understanding of the law and years of experience calculating your plan payment because he will identify the lowest plan payment that he believes the court will approve to save you money.
Are You Ready to See How Experience and Skill Can Help You Get a Lower Chapter 13 Plan Payment?
Our Daytona bankruptcy lawyer has extensive experience working with Chapter 13 debtors to reduce their bankruptcy plan payments to the lowest payment allowed by law. While working within the bankruptcy laws and bankruptcy rules, we calculate the minimum plan payment necessary to satisfy the court and the Chapter 13 trustee while protecting your assets and getting rid of your debts.
Contact our office for a free bankruptcy consultation with a Florida bankruptcy attorney. Call (888) 316-2131 now for your free appointment. Our bankruptcy law firm serves clients in Daytona, Daytona Beach, and throughout Volusia County.