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How are Monthly Payments Determined in a Chapter 13?

July 16, 2013

For many debtors, a Chapter 13 bankruptcy can be a good solution to financial difficulties. Perhaps the most important feature to most debtors is that a Chapter 13 can allow you to catch up on house and car payments and will stall a foreclosure or repossession. Chapter 13 offers many advantages, in that it allows a debtor to get on a payment plan to catch up on their debts and/or repay a certain percentage of their creditors. Each month, a Trustee will collect funds from the debtor and distributes those funds to the debtor’s creditors. To allow you time to catch-up, we can divide up what you owe over a period of up to 60 months. But what is going to determine someone’s monthly Chapter 13 plan payment?

The monthly Trustee payment is going to be determined by a combination of four (4) factors: 1) your household income and expenses, 2) any “priority debts” that you have such as recent tax debt or child support arrears, 3) the amount of arrears on the secured debts for property you wish to keep (for instance mortgage or vehicle arrears), and 4) the value of any non-exempt property that you have. All of these factors affect your Chapter 13 plan payment and can make the Chapter 13 process very complicated (usually too complicated) for pro-se debtors.

If you are considering filing a Chapter 13, the attorneys at Fears Nachawati will help guide you through this complicated process and explain how it works step-by-step. It is our job as attorneys to work hard to make sure that your payment is as low as is possible under the law and that is what we will do. Contact us with any questions today!


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