When considering the possibility of filing a Chapter 13 bankruptcy, something that is frequently wondered by many who may be considering the process is what the size of the payments made into the Chapter 13 plan will ultimately be. Every Chapter 13 bankruptcy is fundamentally built around the central premise of the person who is filing making payments into the bankruptcy trustee, who will then in turn make disbursements to creditors. However, the size of these payments can be impacted by a number of factors, including the nature of the debts being resolved, the financial circumstances of the filer and the nature of certain actions or financial transactions that occur prior to filing.
The first thing to consider concerning what the payment will ultimately be in a Chapter 13 bankruptcy is the financial means of the person who is filing, measured by something called the “Best Efforts Test”. Fundamentally, Chapter 13 bankruptcies are structured so that the payment being made is primarily based on what the person who is filing bankruptcy can afford to pay. In practical terms, this is primarily evaluated by looking at the projected net income that the filer expects to earn moving forward, and the expenses that they also anticipate having on a monthly basis during that time frame. In assisting you with the creation of a Chapter 13 plan, your attorney will help you determine what this projected income will be, and will also work with you to craft a budget that accurately reflects your household expenses.
The second major element in determining the size of the payment being made is something known as the “Best Interests Test”. Essentially, this test analyzes a number of different factors such as the non-exempt property owned by the person filing, as well as any preferential payments made to creditors or gifts to friends or relatives (over a certain size) made within certain specific time frames prior to filing. In working with your attorney, they will also ensure that the plan proposed satisfies these requirements as well.
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Thus, a Chapter 13 plan is primarily set by two devices – these being the “Best Efforts” and “Best Interests” tests. While there are a number of different factors inherent in both of these evaluations, our experienced attorneys are highly knowledgeable in how each of these analysis operate, and they would be more than happy to apply their expertise to assist in crafting a Chapter 13 plan tailored to your individual circumstances. So, when the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.