Chapter 13 Repayment Plan – How Much Will I Pay Monthly?

When a debtor files for Chapter 13 it means that he is willing and able to repay his debtors up to an agreed upon amount.  Instead of paying several creditors, the debtor pays one amount to the trustee who then distributes the payment to creditors. This amount is determined by applying the debtor's financial information to tests set out by law.  The highest amount of these tests is the amount set for the debtor's repayment plan.

The first test is the Best Interests of Creditors test.  This test determines what creditors would receive if this same case were a Chapter 7 liquidation.  This number is determined by subtracting the estimated Chapter 7 administrative costs from the value of non-exempt assets.  A creditor should not receive less payment than it would if the debtor filed for Chapter 7.

The second test is the Best Efforts test which determines how much monthly disposable income a debtor has.  Disposable income is current monthly income minus living expenses and other necessary expenses.

Chapter 13 is set up to help you pay creditors at an achievable amount.  Your creditors get paid and you are no longer swimming above your head with payments that are impossible to keep up with.  If you are able to make some monthly payments towards your debt, but not all, and are gainfully employed Chapter 13 may be a good option for you.  Contact a knowledgeable bankruptcy attorney at the Fears | Nachawati Law Firm to explore all of your alternatives.