When filing a Chapter 13 bankruptcy the number one question by potential clients is: what will be my monthly payment? There are many factors that are considered when determining a chapter 13 payment:
- income,
- necessary expenses,
- non-exempt assets,
- repayments to creditors in the 90 days prior to filing,
- and repayments to friends and family members.
What Must Be Paid into a Bankruptcy Plan
When an individual is filing a chapter 13 bankruptcy the debtor must pay into the plan what they would have lost in a chapter 7 filing. For example: we have a debtor, who on the day filing bankruptcy, had an ATV valued at $5,000, a boat valued at $3,000 and he repaid his brother 4 months prior to the filing in the amount of $2000. In this example, the debtor has $8,000 worth of non-exempt assets and a repayment of $2,000. This means, that at least $10,000 has to be paid into the plan during the life of the plan.
How Debtor's Priority Tax Debt Affects Payment
Another factor that can affect the plan payment is the debtor’s priority tax debt. Priority tax debt also must be paid off during the life of the plan. Continuing with our example, the debtor also owes priority tax debt to the IRS for $12,000 and the Minnesota Department of Revenue in the amount $4,000. The debtor’s hurtle is now $16,000 that is required to be paid during the life of the plan. But notice how we do not add $10,000 and $16,000 together to create a new hurtle. Instead the amount paid toward the tax debt is included in the existing $10,000 hurtle.
Secured Debts Paid Through a Bankruptcy Plan
What about secured debts paid through the plan? In our example the debtor also has $5,000 in house arrears. The debtor would be required to pay in $16,000 and $5,000 for a total amount of $21,000. Notice how the amount paid to a secured creditor is not included in the $16,000 hurtle.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
When determining the Chapter 13 plan payment there are several factors to consider. Additionally, attorney’s fees and trustee’s fees are paid in the Chapter 13 plan. Contact the attorneys at LifeBack Law and see us at www.LifeBackLaw.com. You will be glad you did!
