If you plan to file for bankruptcy, you have various options including reorganization or liquidation of assets. However, you may choose to file for bankruptcy under Chapter 13 if you wish to keep your assets. In this bankruptcy procedure, everything that is left of your income after deducting your expenses goes towards a repayment plan that is approved by the bankruptcy court.

Do note that getting all the required paperwork together can be stressful. In this article, learn about the nuances of filing for bankruptcy and what it involves. Also, learn about the average monthly payment for Chapter 13.

Definition Of Chapter 13 Bankruptcy

When you file for bankruptcy under Chapter 13, you propose to pay some or all of your debts over an agreed period of three to five years. The idea is to create a repayment plan according to which you will be paying an amount every month. Whether you qualify for a 36-month term or a 60-month term generally depends on your income for the past six months before filing for bankruptcy.

Debts Included In Chapter 13

If you are filing for bankruptcy under Chapter 13, you will be required to make the payments following the repayment plan. There are certain debts that must be paid in full when you are seeking relief under Chapter 13. Listed below are some of the debts that are included under Chapter 13.

Priority Debts

Certain obligations must be paid during bankruptcy. Payment of these debts takes top priority above everything else. These debts include the following:

• Alimony and child support payments
• Unpaid state and federal taxes.
• Wages to be paid to the employees.
• Other priority debts, including certain types of taxes.

Mortgage Arrears

If you have missed your mortgage payments, you must pay off all the arrears through the proposed repayment plan. However, if you plan to surrender your home then you won’t have to pay any arrears. Certain states and areas may need you to make regular mortgage payments. If that is the case, your average monthly payment for Chapter 13 according to the plan can increase. 

Car Loans And Secured Loans

Under most jurisdictions and states, you will have to pay your car loans and other secured mortgages in full. You must pay off the entire loan through the payment plan. In some jurisdictions, you will be required to pay off your car loan irrespective of whether you are current or behind on the payments.

Other Unsecured Loans And Debts

You may have to pay other debts as well that are a part of Chapter 13 Bankruptcy but have some cumulative dues to be paid.

Administrative Fees And Costs

The trustees involved earn a certain percentage of all the amounts that they distribute to the creditors through the repayment plan you have opted for. This percentage depends on the state you are living in and that can go up to 10 percent of the payment. However, to talk in general terms you may need to pay the usual rate plus 1 percent up to 3 percent.

Seek A Bankruptcy Lawyer To Know Your Estimated Monthly Payments

A bankruptcy lawyer can help estimate Chapter 13 monthly repayments by reviewing the debtor’s income, expenses, and debts. They will calculate the debtor’s disposable income, which is the amount left after deducting necessary expenses from their income. The disposable income is then used to determine the monthly repayment amount for the debtor’s creditors over a three to five-year period. 

Your bankruptcy lawyer will also review the debtor’s secured and unsecured debts to ensure they are included in the repayment plan. For example, a bankruptcy lawyer from Lincoln-gGoldfinch Law can help you develop a feasible repayment plan that satisfies the creditors’ and the bankruptcy court’s requirements. This way, they can minimize your financial burden.

Summary

To conclude, filing for bankruptcy under Chapter 13 can bring financial relief. However, the entire process of arranging the paperwork, and filing for the same may get complicated. Through this article, you have gained a general idea of the monthly payments you will need to make under Chapter 13 Bankruptcy. However, for more specific information you should talk to a bankruptcy attorney who can help you with all the rules applicable in your area.

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