07 Feb How Much in Chapter 13
Chapter 13 is a repayment plan for individuals with regular income sufficient to pay their current living expenses and make a payment on their old debts. The debtor gets to propose the plan; that plan may provide for payments that give creditors very little on their claims all the way to 100% of the claim, plus interest. So, how do we know which it is?
The Bankruptcy Code has three tests for “how much”; essentially, the debtor must pay, over time, the greater of
- What his unsecured creditors would get if he were to file a Chapter 7 liquidation;
- All of the “disposable income” available each month over the life of the plan; or
- Enough to pay the priority claims (generally, recent taxes & back support).
The debtor may also want to cure mortgage arrears; pay off a car loan; or pay in full a co signed debt through the plan. Those are choices; the law only requires the larger of the 3 numbers above.
Chapter 13 is a powerful tool for consumers, especially as it allows the debtor to pay the necessary attorneys fees for bankruptcy relief from the payments to the Chapter 13 plan.
More on how Chapter 13 works.
Cathy Moran, Esq.
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