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
We will cover all that and more in this article.
A Chapter 13 bankruptcy is known as a wage earner's plan where a debtor will often put together a 3 or 5 year Chapter 13 repayment plan to pay back some or all of their debt.
As a court-supervised Chapter 13 repayment plan, you receive the protections provided by the Bankruptcy Code. Some advantages or reasons for filing Chapter 13 bankruptcy include:
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.
When we started Ascend, we realized there wasn't much information to help you get a granular Chapter 13 repayment plan example.
As such, we built the following free Chapter 13 repayment plan calculator based on the official Chapter 13 bankruptcy forms to help you estimate your Chapter 13 repayment plan based on your unique financial situation.
Here's are two personalized examples of the results from the Chapter 13 repayment plan calculator above.
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 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.
However, if you have a complex case, including any of the following issues, you may want to speak with a Chapter 13 bankruptcy attorney:
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.
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).
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:
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.
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.
You can check out Chapter 7 means test article and find the median incomes for your state. For example, here is the California bankruptcy means test and the Arizona bankruptcy means test information. You can find the most recent figures on the UST’s website here.
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:
After deducting allowable monthly expenses, the result is your disposable monthly income. That amount must be added to your Chapter 13 bankruptcy payment.
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.
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.
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.
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.
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.
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