Calculating a Chapter 13 Plan
Kansas City Chapter 13 Lawyers Explain How to Calculate a Repayment Plan
Unless the court grants an extension, the debtor must file a Missouri or Kansas Chapter 13 bankruptcy repayment plan with the petition or within 15 days after filing the petition. You must submit a plan for court approval. You must also provide for payments of fixed amounts to the trustee on a regular basis. This is typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan. The plan may offer creditors less than full payment on their claims. A Chapter 13 lawyer can help with all this.
The court calculates Chapter 13 repayment plans using a number of factors. These may include the types of debts and property involved, the location of the filing as well as your income and expenses.
Types of Claims
There are three types of claims:
- Priority. Priority claims get special status by the bankruptcy law. These may include most taxes, past due child support and the costs of bankruptcy proceeding.
- Secured. Secured claims are those for which the creditor has the right to take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt.
- Unsecured. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plan. Depending on your situation, you should discuss strategies for your repayment plan with your attorney. You may want to get out of bankruptcy as quickly as possible. Alternatively, you may want to stretch out a plan, which can lower plan payments.
If the debtor wants to keep the collateral securing a particular claim, then the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the debt underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, then the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation).
Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the original loan repayment schedule. These may may be longer than the plan so long as any arrearage is made up during the plan.
Defining Disposable Income in Chapter 13
The plan can pay non-priority unsecured claims less than the full amount due as long it provides that the debtor will pay all projected “disposable income” over an “applicable commitment period,” and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor’s assets were liquidated under Chapter 7.
In Chapter 13, “disposable income” is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15 percent of the debtor’s gross income. If the debtor operates a business, then the definition of disposable income excludes those amounts necessary for ordinary operating expenses.
The “applicable commitment period” depends on the debtor’s current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size. Or, it can be five years if the current monthly income is greater than a family of the same size. The plan may be less than the applicable commitment period (three or five years) only if you pay unsecured debt in full over a shorter period. Consult with a Chapter 13 lawyer if you have questions.
What Debts Can You Discharge in Chapter 13?
As a general rule, the discharge releases the debtor from all debts provided for by the plan. The exception of certain debts are referenced in 11 U.S.C. § 1328. Debts not discharged in Chapter 13 include those for:
- Certain long term secured obligations (such as a home mortgage)
- Alimony or child support
- Certain taxes
- Most government funded or guaranteed educational loans or benefit overpayments
- Arising from death or personal injury caused by driving while intoxicated or under the influence of drugs
- Restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime
To the extent that the debtor does not fully pay the above debts under the Chapter 13 plan, the debtor will still be responsible for these debts after the conclusion of the bankruptcy case.
You can discharge certain debts in Chapter 13 unless a creditor timely files and prevails in an action to have the debts declared non-dischargeable for:
- Money or property obtained by false pretenses
- Fraud or defalcation while acting in a fiduciary capacity
- Restitution or for damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person
The discharge in a Chapter 13 case is somewhat broader than in a Chapter 7 case. Debts dischargeable in a Chapter 13, but not in Chapter 7, include debts for willful and malicious injury to property (as opposed to a person) and debts arising from property settlements in divorce or separation proceedings.
Bankruptcy Attorneys Help Calculate and Propose Chapter 13 Repayment Plans
To best determine what your plan payment might be in Chapter 13, talk with a lawyer. An experienced Chapter 13 lawyer can save you a significant amount of money and time in bankruptcy. The Sader Law Firm places its focus on bankruptcy. Therefore, it dedicates itself to providing quality legal assistance to those serious about seeking relief from their debts. Additionally, our attorneys take pride in helping clients to move past financially difficult times. We want clients to know what it is like to live without heavy debt burdens. Schedule a free consultation over the phone by calling (816) 281-6349 today. You can then learn if filing bankruptcy is right for you.