Filing under Chapter 13 has many benefits and your Chapter 13 repayment plan is an important aspect of your success.
One of the most common questions a person has about filing Chapter 13 bankruptcy is how do I calculate my Chapter 13 repayment plan. We understand that you may be interested in filing Chapter 13, but you are concerned about whether you can afford the Chapter 13 repayment plan
The purpose of this article is to provide information about completing Chapter 13 bankruptcy forms and how those forms impact your Chapter 13 plan payment. However, we caution you that calculating a Chapter 13 bankruptcy repayment plan is a complex process. Many factors could impact the terms of a Chapter 13 repayment plan.
Therefore, we have compiled the following information merely as a means of helping you understand some of the basic forms used when calculating a Chapter 13 repayment plan and some of the data used to determine your Chapter 13 payment.
While we hope the information is helpful, it is not legal advice. Ascend can help you locate a Chapter 13 bankruptcy attorney near you who offers a free bankruptcy consultation. Before undertaking any bankruptcy filing, it can be wise to seek advice from an experienced bankruptcy lawyer in your area.
Here's are two personalized examples of the results from the Chapter 13 repayment plan calculator above.
Which Chapter 13 Bankruptcy Forms Impact Your Chapter 13 Repayment Plan?
Almost all of your Chapter 13 forms can impact the calculation of your Chapter 13 repayment plan. You can check out the official Chapter 13 plan form to see how your ending plan may look like. We will be explaining how it works in much more detail, but I thought it would be helpful for you to see it.
Your bankruptcy forms contain information about your assets, debts, income, expenses, and financial affairs. Any of those areas of your financial situation can impact how much you pay for your Chapter 13 plan payments.
Factors that impact the amount of a Chapter 13 repayment plan payment include, but are not limited to:
The value of your assets
The bankruptcy exemptions you claim
The types and amounts of debt you owe
Your household’s monthly income
Your household’s monthly expenses
Whether you recently transferred any assets to another party
Whether you owe back taxes, domestic support, mortgage arrearage, or other priority debts
If you used your charge cards to purchase luxury items within the last three to six months
Whether you repaid relatives or other insiders within the past year to two hears
What Chapter 13 Trustee Does With Chapter 13 Repayment Plan
The Chapter 13 trustee carefully analyzes the information reported in your Chapter 13 bankruptcy forms to determine if any information could change the amount of the Chapter 13 repayment plan payment you proposed.
It may be impossible to cover all potential issues that could affect Chapter 13 repayment plan payments. So instead, we will explain the basic Chapter 13 forms used to calculate a Chapter 13 repayment plan payment and discuss some of the most common issues that impact the amount of the Chapter 13 repayment plan payment.
Case Complexity and Your Chapter 13 Repayment Plan
However, if you have a complex case, including any of the following issues, you may want to speak with a Chapter 13 bankruptcy attorney:
Recent property transfers within one to two years
Payments to creditors within the past 90 days
Property being held for another person
Ongoing legal actions
Gifts and contributions within two years
Transfers to a trust within ten years
Income from the operation of a business or interest in a business
Chapter 13 bankruptcy cases can help you restructure your debts into an affordable Chapter 13 repayment plan. However, if you make a mistake calculating your Chapter 13 repayment plan, you could experience costly problems. Therefore, it is wise to understand the basics of calculating a Chapter 13 repayment plan.
However, unless you understand bankruptcy law and local bankruptcy requirements, it is wise to see a bankruptcy attorney confirm what you might already have figured out for yourself. It is better to have experienced legal counsel than to waste money and time filing a Chapter 13 repayment plan that will not work and results in a dismissal of your bankruptcy case.
Using IRS Data & General Information for Completing Bankruptcy Forms
The Bankruptcy Means Test helps determine how much you pay for your Chapter 13 repayment plan payment. It also determines whether you must file a 60-month Chapter 13 repayment plan or qualify for a 36-month bankruptcy plan.
In a Chapter 13 bankruptcy case, you use Official Form 122C-1 (Statement of Your Current Monthly Income and Calculation of Commitment Period) and Official Form 122C-2 (Chapter 13 Calculation of Your Disposable Income).
Completing the Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period
The first section of the Chapter 13 Means Test determines your current monthly income and your commitment period. Current monthly income is the average of all household income for the six months before filing bankruptcy. If your spouse is not filing bankruptcy, you must include their household income.
Income not reported in the Chapter 13 Means Test includes payments:
Under the Social Security act, including Social Security disability and retirement income
To victims of domestic or international terrorism
To victims of crimes against humanity or war crimes
VA disability income
You add your gross income from all other sources for the six months before filing bankruptcy and divide by six. The result is your current monthly income. However, it is not always that simple.
Will Your Chapter 13 Repayment Plan be 3 or 5 Years?
Many people are in a 3 or 5 year Chapter 13 repayment plan, potentially with the exception of a 100% Chapter 13 plan.
Let's discuss how the Chapter 13 plan length is calculated.
For example, if your income fluctuates because of commissions or bonuses, you might earn much more money during different periods of the year.
Business income may also be complicated to calculate because you might be entitled to take certain deductions for business expenses instead of using the gross revenues. If you do not have a regular income, you might want to talk with a bankruptcy attorney to ensure you use the correct figures to calculate your current monthly income.
Your current monthly income multiplied by 12 is your annual income. If your annual income is below the median income your state for a household of your size, then you “pass” the means test, and you do not need to complete the send section of the Chapter 13 Means Test. You may file a 36-month bankruptcy repayment plan.
However, you must commit to a 60-month Chapter 13 repayment plan if your median income is more than the state's median income for a family of your size. All of your disposable monthly income must be paid toward unsecured debts. Disposable monthly income is calculated in the second section of the Chapter 13 Means Test.
Disposable monthly income is calculated by subtracting allowable, reasonable monthly expenses from your current monthly income. However, it is not as simple as subtracting your actual monthly expenses.
You are required to use IRS expense figures and national data for many of your expenses. The current figures can also be found on the UST’s website with the median income figures. For example, the current IRS national standard for food for a family of three is $838 per month. If your food expenses exceed this amount each month, you must have receipts and a valid reason for requiring special foods that increase your food budget. Even though you have proof, the court could find you are limited to the national standards.
National standards apply to these expenses:
Apparel & services
Personal care products & services
Out-of-pocket health care expenses
After deducting allowable monthly expenses, the result is your disposable monthly income. That amount must be added to your Chapter 13 bankruptcy payment.
What Happens If You have disposable income:
The bankruptcy court may use your disposable income to pay back debt. Using these three bankruptcy forms used for Chapter 13 bankruptcies, you can estimate whether you have disposable income to pay something back to the unsecured non-priority creditors.
The first form is a Chapter 13 calculation of your disposable income. Below is an image of the form. In this document, to determine if your income and expenses allow for you to pay back creditors, the IRS standard and location guidelines are used.
The second and third forms are Schedule I: Your income (individuals) and Schedule J: Your expenses, respectively. You may be able to report your own expenses in these forms, but it is important to put legitimate numbers. For example, you may be required to present documents to verify the information on the forms.
How Chapter 13 Plans Are State-Specific (California Example)
Each state has different aspects you need to consider. For example, see the information below about Chapter 13 repayment plans in California.
All Chapter 13 repayment plans are based on the Official Form 113 Chapter 13 Plan found on the United States Bankruptcy Court website. However, you must use the Chapter 13 Bankruptcy Plan approved for the bankruptcy district in which you file.
The following forms are the official Chapter 13 repayment plans for the bankruptcy districts in California as of December 2021. However, these forms could be updated, so you should check the court websites for the most current version. Let's cover the forms for the 4 districts of California.
Each local Chapter 13 repayment plan may be slightly different in format, but they all contain the same basic information regarding repayment of debts. For example, the Central District has attachments to file specific motions, while the other districts include those matters within the repayment plan.
Chapter 13 Repayment Plan – Section by Section Summary
Each bankruptcy district may have its own customized local form for Chapter 13 repayment plan. Therefore, we created our list of items included in a Chapter 13 repayment plan based on the federal Chapter 13 bankruptcy forms.
Items in a simple Chapter 13 repayment plan include, but might not be limited to:
Notice to creditors regarding the right to object or file a claim
The amount of proposed plan payment and duration of payments (based on results from the Chapter 13 Means Test)
How the plan payments are made to the trustee (directly or through payroll deduction order)
Treatment of income tax refunds during the Chapter 13 repayment plan
Treatment of secured creditors (i.e., mortgage arrearage, car loan payments, etc.)
Proposed repayment of arrearage and past due payments on secured liens
Motion to Value Line – Request that the court determine the asset is worth less than the lien, thereby making a portion of the debt unsecured
Payment of non-dischargeable debts in full, such as debts owed to the government, restitution payments, alimony, child support, etc.
Motion to Avoid Liens – In some cases, you can void creditor liens, such as non-purchase money security interests on household goods. The debt would become unsecured debts
List of collateral being surrendered as part of the Chapter 13 repayment plan (i.e., giving up your home or car to get rid of the secured payments)
Payment of administrative fees such as the Chapter 13 trustee fees and unpaid Chapter 13 attorneys’ fees
Treatment of non-priority unsecured claims (general debts). These creditors receive a percentage of their claim based on your disposable income and other factors
Treatment of executory contracts and leases – most debtors choose to break the lease if they do not want to continue renting the space
Chapter 13 Repayment Plan Non-Standard Items
There is also a provision for non-standard terms in the Chapter 13 repayment plan. Attorneys may insert unique terms based on the facts of the case to help obtain confirmation of the Chapter 13 repayment plan.
The above explanations and list of items in a Chapter 13 repayment plan are extremely broad. Therefore, it should not be viewed as legal advice or relied upon to complete a Chapter 13 repayment plan. However, the United States Courts provide detailed information about Chapter 13 Bankruptcy Basics on its website and instructions for bankruptcy forms.
Should You Try to File Chapter 13 Bankruptcy Without an Attorney?
Only 2.3% of Chapter 13 closed bankruptcies between 2010-2016 were successfully completed without a bankruptcy attorney (Source: American Bankruptcy Institute), Chapter 13 cases are much more complicated than a typical Chapter 7 case. A mistake could result in the dismissal of your bankruptcy case. Even though you might not face fraud charges or fines for making a mistake, the dismissal could have severe impacts on your future.
You might be barred from filing for bankruptcy relief or a specific period. While you are waiting to refile your Chapter 13 case, your vehicle and home could be taken by the bank. Once you file Chapter 13, it might be too late to get them back.
We understand you might be curious about filing a Chapter 13 bankruptcy case in California. You might still have questions before contacting a lawyer. Ascend can help.
Try our Chapter 13 Calculator to estimate what your Chapter 13 payment might be if you filed a case. Then, learn about the pros and cons of Chapter 13 bankruptcy cases and alternatives to filing Chapter 13. This service is provided free of charge to you. You can take the free calculator below.