Contrary to the popular belief, calculating how much your Chapter 13 bankruptcy plan will be is not just about adding up your bills and dividing it all by 60 months. If it was that easy, the number of people filing for bankruptcy would be much bigger.
In reality, there is a lot more bureaucracy and math involved when it comes to determining your payments in a Chapter 13 bankruptcy plan. We brought our Salt Lake City Chapter 13 bankruptcy attorney from the JMM Legal to explain how to calculate your monthly payments under a bankruptcy plan.
How to determine your disposable income
Before filing for bankruptcy under Chapter 13, you have to provide the court with proof or regular and stable source of income. That means not only your wages earned at your job, but also alimony, pension, unemployment compensation, social security payments, and other sources.
If your wages – or any other source of income – is not stable or consistent, you may want to come up with a plan that would take into account all possible and expected decreases or increases in your income for months and years to come.
The second step to estimate your monthly Chapter 13 bankruptcy payments is to list your actual monthly expenses, our Salt Lake City Chapter 13 bankruptcy lawyer says.
This is the step when you can determine your “disposable income,” which is your expenses subtracted from your income. If you do not have certain types of debt or nonexempt assets, the disposable income will be your monthly payment under Chapter 13 bankruptcy. But if you have certain types of debt or nonexempt assets, keep reading and calculating.
What types of debt must be paid in full under Chapter 13
Priority Debts are the debts that have to be paid in full in a Chapter 13 bankruptcy plan. These include certain income taxes, past due child support and alimony payments, money you owe someone who worked for you / your company, and certain other types of debt.
Your monthly Chapter 13 payments will also take into account the so-called Secured Debts (which are your property or car payments). If you are behind on this type of payments and your goal is to keep your house and car after filing for bankruptcy, your Chapter 13 payment plan has to be big enough to pay off Secured Debts during your plan.
What about unsecured debts?
As for your unsecured debts, which include credit cards, medical bills, personal loans, etc. they must be paid by your Chapter 13 plan in the amount that would equal the value of your nonexempt assets.
One of the biggest advantages of filing for bankruptcy under Chapter 13 is that you do not necessarily have to pay your unsecured debts in full when your plan comes to its completion. All it matters is that you pay off your priority debts and your secured debts. The rest may be discharged.
However, you may want to seek legal help of a Salt Lake City Chapter 13 bankruptcy lawyer from the JMM Legal in order to find out which debts are discharged and which are not.
Calculating your Chapter 13 plan payments
Now we have come to the most exciting part: calculating your monthly Chapter 13 plan payment. First, take your yearly income (for example, $50,000) and subtract your yearly expenses ($35,000). Then add your priority debt ($6,000) and the value of your nonexempt assets ($3,500). This would total $24,500. Now divide this sum by 60 months to determine your monthly payment: $408.33.
Contact our best attorneys in Salt Lake City at the JMM Legal to calculate your Chapter 13 payments today. Get a free consultation by calling our offices at 1-801-505-9679 or complete this contact form.