How To Calculate Chapter 13 Bankrupcty Repayment Plan

Written by James Hirby | Fact checked by The Law Dictionary staff |  

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After a bankruptcy is filed, creditors, for the most part, must suspend collection activities of their debts expect as directed by the trustee. The debtor cannot sell or gift their property that has been listed as a part of the bankruptcy estate.

A Chapter 13 trustee uses three separate methods, the Means Test, Difference between I and J, and liquidation value of assets, to calculate the amount assets will pay towards the Chapter 13 plan payment. The initial method is the "Means Test", also used to calculate whether someone qualifies to file a chapter 7 bankruptcy. The means test assesses whether you make more than the median income for your state of residence. If a person files taxes as “Single” and has no dependents, and makes less than the median gross monthly income in that person’s state of residence, then that person is not forced to pay any money back to unsecured non-priority creditors, such as credit cards. This means that this person’s plan payment is whatever money is left over after paying rent or mortgage and all other living expenses, such as food, clothing, utilities, and the like without paying any creditor bills. For example, if a person made less than the gross monthly income, and only took home $3800.00 net income a month, and only spent $3300 on rent, clothes, utilities, food, car payments, and the like each month, then that person’s plan payment would likely be $500.00 per month. If that person made more than the gross monthly income, then that person’s plan payment would be either the excess income above the median, or whatever left over, disposable monthly income that person has after subtracting the IRS standard living allowances.
Please understand that this is a broad, generalized overview of the process involved with filing a Chapter 13 Bankruptcy, and the process used by a trustee to figure out a debtor's monthly payment to the plan.

The likely reason a person’s attorney would not want to try to do this estimating of what a person’s payment plan might be right now is because calculating Chapter 13 payments is not a non-trivial task. It is not as simple as dividing some number by 60 (the number of months the plan will exist) with a calculator. Payments will depend greatly on the results of the means test, the person’s Schedule J, the “Best Interest of Creditors test”, to support the rule that a person’s unsecured creditors cannot be worse off for your having filed Chapter 13 than they would have been if you had filed Chapter 7. There is also
the Best Efforts Test; here is where the plan must give unsecured creditors pay equal to the debtor’s monthly disposable income, line 58 of Form B22C that is multiplied by 36 if your income is below the state median or by 60 if your income is above the median. There are attorney fees, filing fee, trustee commission, any exempt creditors, meaning that debt stays. A number of other details can also be included in what will ultimately be the person’s plan.

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