When you file for Chapter 13 bankruptcy, the key to a successful outcome is creating a feasible repayment plan that you can pay each month that the bankruptcy Court, the bankruptcy trustee, and your creditors approve. You need to ensure you have a steady income to fund the repayment plan and meet the minimal requirements to pay off the plan and finalize the bankruptcy.
It’s essential to understand what types of debts to include in your repayment plan, what other items need to be accounted for in your plan, and how a Chapter 13 bankruptcy attorney can help.
Debts
The main focus of your repayment plan are the outstanding debts you need to account for.
Priority Debt
In the repayment plan, you will need to address primary debts first. These are considered the most urgent and important debts that need to be paid off in bankruptcy. Included in these debts are past due alimony, child support, recent tax fees, trustee fees, court fines, and attorney fees. Further, ongoing child support, spousal support, and 401(k) loan repayments must be paid directly in addition to the Chapter 13 payment plan. Chapter 13 attorney fees that are not paid in full at the time of filing can also be paid through the Chapter 13 plan as the attorney fees are viewed as a priority administrative creditor payment.
Secured Debt
The next tier of debt a bankruptcy plan must address is secured debts. These can include vehicle payments, mortgage arrearages, or even ongoing mortgage payments.
Lease Payments
If you are behind on a lease payment, it should be included in your repayment plan. Often times you can work with your bankruptcy attorney to negotiate with your landlord to reduce late payment down to a lesser monthly payment through the Chapter 13 payment plan while allowing you to stay in the residence though the mechanics of how this may work vary greatly.
Bankruptcy Attorney Fees
Unpaid Chapter 13 attorney fees and future Chapter 13 attorney fees that may accrue in your case are paid through the Chapter 13 bankruptcy payment. In the event there are outstanding attorneys fees due at the end of your case, you can reaffirm these outstanding attorney fees if it is required for your discharge.
Best Interest of Creditors
The minimum amount of money you need to pay to your unsecured creditors is called the “Best Interest Number.” This is the minimum amount that must be spread between all of your unsecured debts. It is calculated by analyzing your situation and estimating what would result should your file a Chapter 7 bankruptcy. This number varies greatly from case to case and individual to individual and frequently can be as low as $0.00. On the other hand, if you have a lot of valuable property or real estate with equity, this could be a very large number sufficient to pay all of your debts at 100%. This ensure that your creditors will receive some type of repayment as required as you go through the Chapter 13 process.
Financial Changes
Throughout your repayment plan, your finances may change. When that happens, you need to notify your attorney who will amend or update your plan and documents with the court if needed. Changes could be raises, demotions, unemployment, unexpected bonuses, unemployment, and changing of job, as well as unexpected windfalls like inheritance, gifts, or other lump sum sources.
Lump Sums of Money
If you received lump sums of money from a lawsuit settlement, inheritance, any assets you’ve sold, withdrawals from retirement accounts, loans, unexpected bonuses, financial gifts, or assistance from friends or family, you need to account for it in your repayment plan. These will help determine how much money you have at your disposal to make payments.
Increased Income
If your income increases or you make a large amount of money, the court may require increasing the amount of money you pay in each monthly payment. This can sometimes (though not always) reduce the length of your repayment plan – allowing you to finalize your bankruptcy sooner.
Missed Payments
It’s essential to create a repayment plan that you can adhere to. Missing a payment can have detrimental consequences for your bankruptcy case. It can result in your case being dismissed, or the court changing your case from a Chapter 13 bankruptcy case to a Chapter 7 bankruptcy case. If this happens, the court can liquidate your nonexempt assets to pay off your outstanding debts.
However, if you are late by a few days, you likely won’t face stiff penalties. But you should alert your trustee and your bankruptcy attorney to determine how to proceed and what steps you need to take. If you fall behind and are unable to catch up, the trustee will file a motion to dimiss the bankruptcy. This motion to dismiss will allow some time for your attorney to try to negotiate a financial workout with the court that will allow you to continue the bankruptcy.
Let Us Help You With Chapter 13 Bankruptcy
To ensure your Chapter 13 bankruptcy case goes smoothly, and your repayment plan is feasible, let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. help. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.
