How Much Will Your Chapter 13 Bankruptcy Plan Payment Be?

How Do Your Chapter 13 Bankruptcy Payments Get Determined?

In every Chapter 13 bankruptcy, the debtor (the person filing bankruptcy) makes what are called "Plan Payments" to the trustee, an official assigned to your bankruptcy case by the court to oversee the administration of your case. The debtor creates a "Plan" that shows all creditors exactly how much, if anything, the debtor is going to pay each of his debtors. Once the "Plan" is approved by the court, it becomes the roadmap that the trustee uses to pay the creditors. How much these payments are is unique to each debtor and to the debtor's financial situation and their goals for Chapter 13 Bankruptcy.

This article will discuss the major components that are used to determine a plan payment in Chapter 13 Bankruptcy. You will learn how long the payments will have to be made and which debts are required to be paid 100%. Also, you will learn that there are other debts that are paid only an amount that the debtor can afford to pay.

How Long Do Payments Have To Be Made To The Trustee?

The length of time you must make payments to the trustee depends on your "Current Monthly Income" or "CMI" as calculated by averaging your last 6 months of income. If your CMI is above the median income for your county, then you will make payments for 5 years. If your CMI is less than the median, then you can propose a shorter time period, such as 36 months

What Does the Debtor Pay In A Chapter 13 Bankruptcy?

There are some debts that must be paid 100% in a Chapter 13 Bankruptcy. Other debts can be paid as little as nothing depending on certain factors as discussed below. The following List provides some guidance:

  1. Administrative Costs are paid 100%

    These include:

    • The Trustee's commission (3% to 10% of each monthly payment)
    • The debtor's Chapter 13 Attorney's unpaid fees
  2. Priority Debts Are Paid 100%

    These include:

    • Unpaid spousal and child support
    • Recent unpaid taxes (some older taxes may be dischargeable, check with your attorney)
    • Unpaid wages, salaries and commissions owed to employees
    • Unpaid employee contributions to an employee benefit fund
  3. Mortgage Defaults on Home the Debtor Wishes to Keep are Paid 100%

    (the unpaid house payments are paid 100% and the regular house payments are kept current)

  4. Other Secured Debt Defaults on Property The Debtor Wishes to Keep are Paid 100%

    (i.e.; unpaid car payments on a car the debtor wishes to keep are paid 100%, and the current payments are kept up as well)

  5. Unsecured Debts get paid as little as 0%, or up to 100%

    Depending on the following:

    • The amount of disposable income after deductions
    • The total value of non-exempt property

How Do I Calculate My Approximate Monthly Payment?

The process to determine an actual plan payment is quite complex, but the following is a quick guide to see if it is even feasible to consider Chapter 13 Bankruptcy. Be sure to only use the number you come up with as a starting point for discussions. Your actual number will absolutely be different!

  1. Take your gross monthly income (including both you and your spouse if married) and deduct the amount necessary for your income taxes and other required deductions from your paycheck such as insurance, 401k, etc. This is your "adjusted gross income."
  2. Add up all administrative costs such as your attorney's unpaid legal fees and divide that by 60. This is your "administrative costs."
  3. Add up all of your monthly payments on debts secured by property that you want to keep, such as your home, cars, etc. This is your "current secured debt payment."
  4. Determine your monthly budget for all of your living expenses such as food, gas, utilities, and all of the other expenses you have every month. Include large expenses that you have once or twice a year, such as car registration, car maintenance services, and other expenses and divide that number by 12 to come up with a monthly amount. This is your "living expenses."
  5. Then add all of the monthly payments you are behind for debts secured by property that you wish to keep, such as house, cars, etc. Then divide that amount by 60. This is "secured payback amount."
  6. Now, you deduct your "administrative costs," "current secured debt payment," "living expenses," and "secured payback amount" from your "adjusted gross income." If you have money left over, this is your "disposable monthly income."
  7. Multiply your "disposable monthly income" by 1.10 and this will be an approximation of your "plan payment."

Be aware that this calculation does not include any addition for non-exempt property that could increase your plan payment. There are too many exemption options available in California to discuss here, so make sure to discuss this with your attorney.

If You Have More Questions

Please contact us if you have more questions or are ready to move forward and start the process of becoming debt-free. Remember, we are here to help you resolve your debt problems, so call us now!

(949) 954-7568