Did you know that over twelve years more than four million people filed for Chapter 13 bankruptcy? Chapter 13 bankruptcy is a great alternative to Chapter 7 if you have significant property equity and a regular income. Unfortunately, finding out the payment amount that you owe is a complicated process.
Luckily, in this article, we’ll be discussing how a Bloomington, Minnesota attorney can help you determine how much you owe. We’ll also be going into the effect that the COVID pandemic has had on bankruptcy payments. Let’s get started!
What is Chapter 13 Bankruptcy?
Chapter 13 is one of the many different types of bankruptcy relief. With this type of bankruptcy, the courts supervise a reorganization of the debts you owe. Over the course of three or five years, you will pay to pack a portion, or all, of the money you owe. You are typically allowed to keep your property during Chapter 13.
As such, it benefits people who have a lot of their equity tied up in these types of assets. It’s important to understand that not everyone will qualify for a Chapter 13 bankruptcy. It requires a specific amount of disposable income at the end of every month to meet a repayment plan. If your income is too low, then the courts aren’t likely to approve of your case.
The same goes for if your debt is considered too high. Most of the time, Chapter 13 will simply give you more time to meet your debts by spreading them out. This differs from Chapter 7 bankruptcy, which benefits debtors with no property or disposable income. If you want to learn more about the different types of bankruptcy, then consult this guide.
How Do You Determine Your Chapter 13 Payment Amount?
When you file for Chapter 13 bankruptcy you must propose a repayment plan to the courts. This plan details what you can afford to pay creditors. So how do you determine the amount that you owe? There are a variety of factors that need to be analyzed to determine your specific Chapter 13 payment plan.
The first factor is your income and expenses. Income can come from your job, pension, alimony, unemployment payments, disability payments, bonuses, and any other source of regular income. The debtor must provide the court with proof of income for six months.
If you expect your income to increase or decrease, then you can expect your monthly payment to change with it. You will then subtract from this amount any monthly expenditures as defined by the Internal Revenue Service. After you subtract these expenses you are left with your disposable income.
In some cases, this amount becomes your monthly payment. However, it can be further complicated by specific types of debt and non-exempt assets. During the Chapter 13 process, each creditor must come forward with Proof of Claim. This document shows how much debt you are liable for.
All priority debts — things like income taxes, alimony, wages owed, and child support — must be paid. Secured debts, like car and house payments, must also be paid if you wish to keep these assets. Unsecured debts, like credit card payments and medical bills, must at least equal the number of your nonexempt assets. You can learn more about the different types of debts by visiting our guide here.
Do You Need a Bankruptcy Attorney to Handle Your Bankruptcy Case?
Technically, you’re allowed to handle your Chapter 13 bankruptcy case on your own. However, we highly recommend not doing this. It’s extremely unlikely that the courts will approve of your payment plan without the help of an attorney. Only 1% of individuals succeed. Why is this?
The reality is that Bankruptcy 13 law is incredibly complicated. It requires you to file schedules, forms, and statements accurately and on time. You’ll also need to make a payment plan all on your own and inform your creditors. On top of that, you must be present at scheduled dates with your creditors.
These sessions typically last all day and can easily drag into added dates and times. If you make a small mistake or forget one of the procedural rules, then the courts can easily dismiss your case. This is a problem because it will affect your ability to file again shortly.
On top of that, your automatic stay might be limited by this dismissal. That’s why we always recommend hiring an attorney with a strong track record. It might be more expensive than representing yourself, but it will save you a lot of headaches and likely failures.
How Has COVID Affected Bankruptcy Payments?
Due to the economic hardships caused by the COVID pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into effect on March 27, 2020. For individuals with Chapter 13 bankruptcy, this law has several effects. For one thing, it excludes any disposable income and monthly income from federal emergency relief payments.
The law also allows for repayment plans to be extended by a period of seven years. Keep in mind that these changes only apply to bankruptcies filed after the CARES Act was put into effect and lasts for one year.
Do You Live Near Bloomington, Minnesota? Contact Gregory J. Wald
We hope this article helped you find out the process for determining your Chapter 13 payments. As you can see, finding the right attorney is an important part of filing for this bankruptcy. Without one, your Chapter 13 case is almost certainly doomed before it even starts. So how do you find a law team you can trust?
If you live in the Bloomington area, then look no further than the Wald Law Firm. Gregory Wald has over thirty years of experience in bankruptcy law.
When you combine this with his small, individualized practice, you get a law team that’s dedicated to the particulars of your case. This gives you the best chance of getting your payment plan approved. Schedule your free consultation today so that we can begin addressing your debt problems as soon as possible.