When I discuss an Orlando Chapter 13 bankruptcy plan with new clients, the first question that they ask is: “How much is my monthly payment?” The answer depends on why they are filing Chapter 13 bankruptcy in the first place. Each Chapter 13 payment plan is specific to the person and their particular financial situation. Determining how much you must pay in a monthly payment is a case by case determination. Here are some of the rules that apply to every Orlando Chapter 13 bankruptcy plan:
Secured debt must be paid. If you are filing a Chapter 13 bankruptcy to save a home, you must continue to make the monthly payment due on the mortgage. Likewise, if your car loan has a balance, you need to either continue making the monthly payments, or arrange your plan to pay off the balance by the end of the plan period. Arrearages in the balances of secured debt must also be addressed by the plan. Essentially, if you want to keep property that is security for debt, the creditor is entitled to be paid all amounts that are owed during the life of the plan. These balances are incorporated into the monthly payment.
Priority debt must be paid. There are certain debts that are given priority in a bankruptcy. These include taxes, domestic support arrearages, and attorney fees. The Chapter 13 bankruptcy plan must make provision for the payment in full of any priority debt by the end of the plan period (which is three to five years). The balances of these debts must also be incorporated into the monthly payment.
Disposable income must be paid. Chapter 13 requires that all of the debtor’s disposable income be paid in the monthly payments during the life of the plan. Disposable income is the difference between the debtor’s after-tax income, and the amount that is reasonably necessary for the support of the debtor. Disposable income is calculated on a case-by-case basis, based on a monthly budget that is acceptable to the Chapter 13 trustee. Anything that the debtor earns above this monthly budget must be paid each month for the duration of the Chapter 13 plan. An experienced Orlando bankruptcy attorney will help their client create a monthly budget that meets all the financial needs of their family, while at the same time explaining that this budget cannot include luxuries or other expenditures that will not be considered necessary for support. I have found that the Orlando Chapter 13 bankruptcy trustee’s office is fairly reasonable about the amount that a debtor can claim for their monthly expenses. You don’t have to live like a pauper, but any expenditure that is considered excessive will be taken out of the monthly budget, to be paid to creditors in your monthly payment.
Value of non-exempt assets must be paid. This is known as the “best interest of creditors test.” The rule protects unsecured creditors by ensuring that they will be paid at least as much as they would in a Chapter 7 bankruptcy, which requires a liquidation of all of the debtors non-exempt assets. (In a Chapter 7 bankruptcy, the debtor’s non-exempt assets are sold and the proceeds paid to creditors.) This rule prevents a person with lots of assets, but perhaps little or no disposable monthly income, from receiving discharge without having to pay anything to unsecured creditors. So, a debtor seeking relief under Chapter 13 must pay the full value of her non-exempt assets over the life of the plan. For example: A person has $10,000 in a savings account. After using the wild card exemption of $4000, $6000 of the account balance remains non-exempt. The monthly payments must include an amount that would pay the $6000 by the end of the plan period.
These are the primary rules for determining an Orlando Chapter 13 bankruptcy monthly payment. Of course, there are many other rules in the bankruptcy code to determine whether a Chapter 13 plan will be approved by the court. Creating a good Chapter 13 plan that helps a person get on track with their debts with monthly payments, while meeting all of these legal requirements, requires help from an experienced bankruptcy attorney. This is not a do-it-yourself project!