How Much do i pay back in a chapter 13?
A Chapter 13 is plan that pays back a portion or all of your debts over the course of 3 to 5 years. Exactly how much is paid back depends on certain legal and factual criteria.
There are two primary legal tests that determine how much is paid back in a Chapter 13 bankruptcy: (1) the disposable income test; and (2) the best interest of creditors test.
In the disposable income test, the Bankruptcy Code states that the debtor must pay into a plan his income over his necessary living expenses. For example, if your net income per month is $3,000, and your expenses for living such as food, utilities, insurance, and child care costs, are $2,500 per month, then you will be required to pay $500 per month.
In the best interest of creditors test, the Bankruptcy Code requires the debtor to pay unsecured creditors at least the value they would receive if all of debtors nonexempt, nonencumbered (property with liens) property were sold.
For example, if the debtor had a house worth $100,000 and a mortgage on the house with a balance of $80,000, then the unsecured creditors would be entitled about $20,000 over the course of the Chapter 13 plan.
These two test determine the minimum that creditors will be paid back in a Chapter 13. However, creditors will never receive more than the amount of the debt at the time of filing. Thus, the maximum the creditor will receive is what they are owed. In the previous example, if the debtor only had $15,000 worth of unsecured debt, then only $15,000 would be paid even though the best interest of creditors test would otherwise require $20,000 to be repaid.
Finally, creditors are under a deadline to file a claim if they want to get paid under the Chapter 13 plan. After receiving notice of the debtor’s Chapter 13 bankruptcy, the creditors will have 70 days to file a claim stating that there is a debt owed. If the creditor misses the deadline, the debtor will not be required to pay this debt in his plan
Exactly how much you might pay in a Chapter 13 bankruptcy depends on your individual circumstances which might be complex. It is advised to seek the help of an attorney. If you are in Elizabethton, Johnson City, Kingsport or surrounding areas and need an affordable bankruptcy lawyer to explain the Chapter 13 process of paying your debts, call my office.