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People filing for Chapter 13 bankruptcy need to propose a repayment plan which generally continues between 3-5 years depending on your debt and disposable income. You have to pay the specified amount to your bankruptcy trustee who in turn pays your creditors. According to lawyers of Dallas based law firm, some creditors are paid entirely, while others are paid only a part of what is owed to them. If you wish to know how to calculate your plan payments, here is how you can do that:
Debts paid in full through a repayment plan
You need to add up all the debts that need to be paid in full and divide them by the number of months your repayment plan will last. These debts include priority debts like federal and state back taxes, back child support you owed to your ex-spouse and/or child as well as arrearage on any property you wish to keep. Chapter 13 allows you to catch up on mortgage and car loans by making back payments in full through the repayment plan.
Secured debts on the property you want to keep
For you to keep your home, car, or any other property, you need to be current on your mortgage and loan payments. This can be done by either paying the lender directly or through the repayment plan. You can add this amount to your monthly payment for priority debts and arrearage.
Unsecured debts
Unsecured creditors can be paid anything between 0-100% of the dues. The rules which govern this payment are:
- You need to pay your unsecured creditors a minimum amount equivalent to what would have been paid in case of chapter 7 bankruptcy. This amount depends on the amount of exempted property. In case you cannot afford to pay the amount, your plan would not be approved.
- All your disposable income is used to fund your repayment plan. In this case, your unsecured creditors might get paid more than what they would have got in a chapter 7 bankruptcy.
Once this amount is calculated, you can add it to previously made calculations to find out how much you will end up paying per month.
Duration of repayment plan
The repayment plan duration depends on your current monthly income. If this income is less than the state median, the plan is for 3 years; if more, then it will be of 5 years. Once you know the duration of your plan, you can easily calculate the amount you would need to pay every month to repay your priority debts and arrearages.
You can call (888-297-6203) to consult with bankruptcy lawyers of repute.