As a Chapter 13 debtor, you are required to follow a monthly repayment plan to satisfy debts owed to creditors. This plan typically lasts three to five years, and can change along the way based on your financial situation.
Before you file for Chapter 13 bankruptcy, there is one question that will stand out among the rest: how much will the court require me to pay each month?
The amount you pay, as well as how long the plan lasts, depends on the following:
- Your monthly income
- The amount of your monthly income that is deemed “disposable”
- The amount of money required to cover administrative expenses
What is your Monthly Income?
You are only eligible to file for Chapter 13 if you can prove that you have a regular monthly income. This most often includes wages earned through full or part-time employment.
Calculating the duration of a Chapter 13 repayment plan can be complicated, since this takes into consideration your monthly earnings as well as the median family income in your state. Do you earn less than the median income? If so, your plan will last three years. If you earn more than the median, it is likely that your plan will last five years.
Your obligation is to make a monthly payment equal to or greater than your disposable income. This is calculated by subtracting “reasonable expenses” from monthly earnings.
What is considered a reasonable expense? These can include:
- Housing payment (mortgage or rent)
- Utility costs
- Medical bills
- Health insurance
- Disability insurance
- Educational costs, such as tuition and supplies
- Transportation costs, such as maintenance and gas
- Child support payments
- Alimony payments
- Elderly care
- Child care
- Chapter 13 trustee fees
Once your Chapter 13 repayment plan is setup and you are comfortable with your situation, it should be relatively easy to stay on track as long as your finances remain the same. Until then, however, you may have questions and concerns.
We have helped many people file for Chapter 13 bankruptcy and make their way through the process of debt repayment. If you have questions or concerns, contact us at your earliest convenience.