When putting together a Chapter 13 Plan, the bankruptcy code requires that debtors pledge their disposable income less their reasonable, necessary monthly living expenses toward the payment plan. Inevitably, questions regarding reasonable and necessary expenses arise. As those questions could be discussed long enough for several blog posts, let us just say that those determinations are made on a case by case basis, and, much like snowflakes, no two cases are the same.
The simplest way to think of it is that whatever funds you have left after you have paid your monthly bills—housing costs, food, clothing, transportation, etc.—will be pledged to the Chapter 13 plan. Depending on the financial circumstances, it could be $200, or it could be $1,000, or any other number really, but whatever that amount is, it will be your monthly payment. In some cases, the payment amount will increase during the plan if you have car payments or 401K loans, for example, that will mature while your payment plan is pending.
One of the most important aspects of a Chapter 13 is being able to create, and stick to, a budget. This is so important because even though each month’s expenses are treated equally in your payment plan, in real life, each month’s expense are not actually the same. One key to making a payment plan successful will be wisely budgeting to make sure that the payment amount will always be available.
The next question is usually regarding how long the payments will last. In many cases, the payment length is determined by your income level. If your household earns more than the median income for a household of your size, the payment plan will last five (5) years. If however, your household income is below the median, and you are filing a Chapter 13 bankruptcy, your plan may be anywhere from 36-60 months. The important thing to know is that each plan is individually tailored to meet the needs of the filer(s).
At LifeBack Law, we will spend as much time as is necessary to make sure that the plan that we craft meets all of the requirements of the bankruptcy code, yet is comfortable enough for you to be successful. If you are currently employed, but are having trouble meeting your monthly debt obligations, please contact Minnesota’s Nicest Law Firm at lifebacklaw.com formerly www.kainscott.com to discuss whether a Chapter 13 may be right for you. You will be glad you did!