A large number of people are frightened from Chapter 13 bankruptcy due to the belief that an individual will be required to pay part of their of their debts. This type of payment plan under Chapter 13 bankruptcy is often helpful with secured debts which cannot be discharged through bankruptcy. A Chapter 13 monthly payment plan is often used to pay secured debts for collateral that a person wants to keep like an automobile or private residence. If you are involved in a Chapter 13 bankruptcy proceeding, it is often a wise idea to understand exactly how these amounts are calculated.
Calculating a Minimum Monthly Payment
The amount of a minimum monthly payment plan depends on what type of debts a person owes. Some types of debts must be paid in full through a repayment plan, which means that an individual frequently must propose a plan that pays off all of these debts within 60 months regardless of one’s income or expenses. While a Chapter 13 payment plan must be large enough to make certain required payments, the payments must be large enough to satisfy certain required payments. In arriving at the amount that is likely due in a payment plan, however, it is important to consider the following types of debt:
- Administrative Fees. Trustees in a Chapter 13 bankruptcy are paid by receiving a percentage of all amounts that the trustee distributes to creditors through a repayment plan. In many situations, individuals can expect to pay 1% to 3%.
- Mortgage. In order to keep a residence with an outstanding mortgage, a person frequently must pay off all of the outstanding mortgage through a repayment plan. In other situations, where a person plans to ultimately surrender the property, the individual need not pay back the outstanding mortgage. Also not included in a repayment plan are a second mortgage or other junior liens that will be eliminated in Chapter 13 bankruptcy.
- Priority Debts. These types of debts are not capable of being discharged through bankruptcy. Most often, these debts include alimony, child support, and specific types of taxes. These amounts must be paid off in full through a repayment plan.
- Unsecured Debts. The amount an individual pays on these amounts depends on what is owed. The amount that must be paid will depend on the total value of the nonexempt property, the amount of disposable income that a person has to pay towards debt, and the length of time that the repayment plan is expected to last.
Contact a Knowledgeable Bankruptcy Attorney
It can prove to be particularly difficult to calculate what a repayment plan will be unless many unique factors are taken into consideration. An experienced bankruptcy attorney will be able to best inform you about what amount will likely be due under a Chapter 13 bankruptcy repayment plan. If you are debating a Chapter 13 bankruptcy, it is often a wise idea to consult about matters with a seasoned bankruptcy attorney like Jim A. Lyon. Contact our law office today to obtain assistance in navigating the many complicated issues that can arise in a bankruptcy proceeding.