Often debtors filing for Chapter 13 bankruptcy want to know what their monthly repayment plan will cost. It’s impossible for a bankruptcy attorney to give a debtor an exact dollar amount; but there are four factors that help determine how much money a Chapter 13 bankruptcy debtor will be required to pay.

1. The first factor is what is called “Chapter 7 Liquidation Analysis” which hypothetically examines what would happen to your unsecured creditors if you filed for Chapter 7 bankruptcy. If money would be leftover to pay the unsecured creditors in a Chapter 7 bankruptcy then at least that amount would be added to your Chapter 13 bankruptcy repayment plan.
2. The “Means Test” is used to determine your current monthly income, which uses the past six months of income to come up with the calculation.
3. The “Disposable Income Test” subtracts your regular monthly expenses from your monthly income. Expenses do not include things such as credit card payments, student loans or any other payments to unsecured creditors. This amount is your disposable income. The bankruptcy court may require you to use all of this disposable income amount to repay creditors in Chapter 13 bankruptcy.
4. “Required Payments To Priority And Secured Creditors” are payments that you must pay in full and first in Chapter 13 bankruptcy. These payments could include child support, taxes, student loans etc.

Speak to a bankruptcy attorney to determine how you can best protect your assets in a Chapter 13 bankruptcy.

Many times debtors who are considered “above median income” by the bankruptcy courts worry about their ability to pay bankruptcy repayment plans and the length of time they will be required to remain in Chapter 13 bankruptcy. Because many “above median income” debtors lack disposable income or have experienced recent financial disruptions, their financial ability to pay on paper does not match the reality of their circumstance. There has been some confusion about this point because in the past, “above median income” debtors filing for Chapter 13 bankruptcy were required to either pay their debts in full or to partially/fully repay creditors over the course of 60 months, even if they didn’t have any disposable income. However, recently bankruptcy courts have begun considering the debtor’s “real” income and expenses to determine a more feasible Chapter 13 bankruptcy repayment plan. Basically, “above median income” debtors can expect that the bankruptcy court will consider the debtor’s real ability to pay when determining the amount of the repayment plan over the course of 60 months.

If you’re an above median income debtor with little or no disposable income, Chapter 13 bankruptcy can still be a viable option. Generally speaking, bankruptcy courts will allow you to pay based on your ability and take into consideration your current financial obligations and income. To find out your bankruptcy options speak with a bankruptcy attorney today.

If you’re in a Chapter 13 bankruptcy repayment plan, don’t forget to carefully examine your bankruptcy payments for tax deductions. Depending on what is being repaid by the trustee in your Chapter 13 bankruptcy, you may be entitled to deduct some payments from your 2008 taxes. For the purpose of your taxes, payments made by your Bankruptcy trustee will be treated as if you made them yourself. After all, it is you who is paying; but of course through the bankruptcy trustee, so you still have a right to claim those tax deductions you would normally take if you weren’t in bankruptcy. For example, if you’re paying mortgage interest in Chapter 13 bankruptcy and/or defaulted mortgage payments, those payments may be deductible from your 2008 taxes. If you’re paying federal or state taxes, spousal support or business debts/expenses through the Chapter 13 bankruptcy this may also be deductible from your 2008 taxes. Speak with your bankruptcy attorney and tax accountant to find out what tax deductions may be available to you during Chapter 13 bankruptcy.

If you file Chapter 13 bankruptcy and are funding your bankruptcy repayment plan through payroll deduction, it is still your responsibility to make sure that payments sent, are accurate and on time. If your employer fails to withhold the payments, does not withhold enough money or sends in the payment late, you are responsible for fixing the problem. The employer will not under any circumstances be held responsible by the bankruptcy trustee for missed, late or inaccurate payments. That is solely the responsibility of the debtor. Many debtors go through the process of Chapter 13 bankruptcy and suffer dismissal because they left the responsibility up to employers to pay the plan properly and in a timely fashion without overseeing their own plan. While paying through payroll deduction is convenient it does not absolve the debtor from actively overseeing their Chapter 13 bankruptcy repayment plan.

Debtors can eliminate repayment problems with payroll deduction by realizing that their first payroll deduction will most likely not occur immediately. That means that the debtor should go ahead and send the bankruptcy trustee the first and second payment. When mailing a payment to the bankruptcy trustee, make sure to include your name and case number on the check or money order.

Since the 2005 changes in bankruptcy law, including a vehicle in a Chapter 13 bankruptcy is a lot more complicated. The bankruptcy law states that if you are filing a Chapter 13 bankruptcy and you purchased your vehicle less than 910 days ago, you are required to pay the full balance and interest you owe on the car during your Chapter 13 bankruptcy. In other words you won’t save a dime. The only perk you get is to keep the vehicle. But if you’re filing Chapter 13 bankruptcy and you purchased your vehicle more than 910 days before filing bankruptcy, the bankruptcy trustee may allow you to pay the "fair market value" of the vehicle, plus reduced interest. Because most cars depreciate significantly during the first 3 - 4 years, the "fair market value" you will pay will most likely be significantly less than your original car loan.

Since the Chapter 13 bankruptcy 910 day rule is still evolving, many judges interpret the rule differently. That’s why if you’re filing Chapter 13 bankruptcy and have a vehicle (with a loan) it is critical that you speak with your bankruptcy attorney about any recent changes in the 910 rule and how it will affect your Chapter 13 bankruptcy case. It is very important that the 910 day rule be approached properly because it could end up becoming very costly for anyone filing Chapter 13 bankruptcy.

Many debtors in Chapter 13 bankruptcy are eager to get the process done and over with. That leads them to consider their options, such as paying off their Chapter 13 bankruptcy plan early. Although a debtor can technically pay off their Chapter 13 bankruptcy plan early, the real question is…who exactly does that benefit? Filing Chapter 13 bankruptcy can be tricky enough, but paying off the plan early just may put the debtor under the scrutiny of the bankruptcy trustee. If a creditor notices that a debtor has paid off the Chapter 13 bankruptcy early, he/she may ask the bankruptcy trustee to consider the extra funds income. What this means is that the creditor wants the bankruptcy trustee to recognize that the debtor has "extra cash" lying around and can now pay more to the creditors. When someone files for Chapter 13 bankruptcy, the plan allows them to pay the creditors pennies on the dollar; but this is only because of the debtor’s income. If the debtor’s income increases, the bankruptcy trustee may feel justified in increasing the amount of money the debtor must pay the creditors each month.

The bottom line is that if you have a Chapter 13 bankruptcy repayment plan, stick with the program. Use all of the time you have available to repay your creditors and don’t cause the bankruptcy trustee and creditors to become suspicious by paying off your plan early.

Unsecured debt that has not been paid by a debtor will often go to court in an effort by the creditor to win a judgment. When a creditor wins a judgment against a debtor, that "unsecured debt" becomes "secured debt" and the creditor now has the right to take aggressive collection action against the debtor. With a judgment a creditor can garnish bank accounts, wages and place a lien on real estate or other property owned by the debtor making it impossible for the debtor to sell the property without paying the debt first. When a debtor files for Chapter 13 bankruptcy, the creditor with a judgment will file a secured claim with the bankruptcy court. Most times, in a chapter 13 bankruptcy, secured claims are paid first and in full, before any unsecured creditors.

If a creditor has won a judgment against you in court and/or has placed a lien against your wages, bank account or property, speak with a bankruptcy attorney immediately. The bankruptcy attorney may be able to file a motion to have the lien removed, especially if it is encumbering your ability to pay for basic expenses such as food, shelter and utilities.

There is no minimum amount of debt required to file bankruptcy. Legally, you could file bankruptcy on $1; but who would do that? Bankruptcy is designed to provide relief to debtors facing unmanageable amounts of debt. The biggest issue with debt limits in bankruptcy is not the minimum; but the maximum amount of debt you are allowed to file bankruptcy on. According to bankruptcy law, a debtor filing for Chapter 13 bankruptcy may not have more than $336,900 in unsecured debt or more than $1,010,650 in secured debt. If a debtor owes more than those debt limits, they are not eligible to file for Chapter 13 bankruptcy. Individual debtors who owe more than the prescribed debt limits may be able to file for Chapter 11 bankruptcy which is usually used by businesses.

If you’re a debtor considering bankruptcy, these limits are not the only numbers you should consider. As pointed out earlier, if you only owe $1, it doesn’t make any sense to file for bankruptcy. But the same conclusion might be applied to $20,000 depending on your financial circumstances. Two people might both owe $20,000, but for one person the debt may be manageable while the debt may be crushing for the other person. Speak to a bankruptcy attorney to find out if bankruptcy is right for you and/or which type of bankruptcy suits your circumstances.

When a debtor files for Chapter 7 or Chapter 13 bankruptcy, a bankruptcy trustee is appointed to oversee the case. Many debtors who file for bankruptcy without an attorney, mistakenly believe that the bankruptcy trustee is there to protect them from the creditors when in fact the bankruptcy trustee’s main responsibility is to collect money from debtor’s assets and use them to pay creditors as required by the bankruptcy laws. In other words, the bankruptcy trustee is looking out for the creditors’ interests. Although the bankruptcy trustee is not the enemy of debtors, they will act against any debtor that does not follow bankruptcy law even if it’s because the debtor doesn’t know the law. During a Chapter 13 bankruptcy, the bankruptcy trustee reviews the proposed repayment plan to make sure that it follows the law and he/she is also the person that collects monthly payments from the debtor and distributes them to creditors, according to the Chapter 13 bankruptcy plan. In a Chapter 7 bankruptcy, the bankruptcy trustee will collect and liquidate the debtor’s assets and distribute the money to creditors. It is the job of the bankruptcy trustee to make sure that the creditors get their fair share of the debtor’s money.

Many debtors who file for bankruptcy without the help of an attorney don’t know all of the important intricacies of bankruptcy law and become vulnerable when the bankruptcy trustee and creditors seize their assets or bring complaints against the debtor. This is why it’s worth the investment to work with an experienced attorney who can look out for the debtor’s interest while the bankruptcy trustee looks out for the interest of creditors.

If you’re a debtor filing for Chapter 13 bankruptcy you will be required to take a means test to determine if there is enough disposable income to fund a Chapter 13 bankruptcy. During Chapter 13 bankruptcy, a debtor will be required to fill out a B22 form which will generate a budget, with expense categories — housing, food, clothing, transportation etc. Each expense category is given a dollar figure by the IRS and they are not generous by any stretch of the imagination. For example, the IRS says that you should not spend more than $1,500 per month for housing; but many Dallas-Fort Worth residents spend well over that. What happens if you spend more than what the IRS says you should be spending? Well, let’s say you’re spending $3,000 a month for a mortgage and the IRS only allots you $1500…well, that extra $1500 may be made available to creditors, even though you need it for your housing.

This is why it is so important for any debtor considering Chapter 13 bankruptcy to sit down with their attorney and review their expenses and compare it to what is allowable by the IRS/B22 form used in the bankruptcy means test. If you’re spending too much in a certain category and not enough in another, you may want to shift some of those expenses around before you file for Chapter 13 bankruptcy.

If you’re in Chapter 13 bankruptcy you can still sell your home but you must first get approval from the bankruptcy court before you close on the property. The bankruptcy court must approve the terms of the sale and your attorney must notify all of your creditors before the property is sold. You attorney must disclose to the bankruptcy court and creditors the home’s sale price, the value of the property and proof of the current value of the property and how you propose to allocate the proceeds from the sale. After the home is sold your attorney must provide to the bankruptcy trustee and creditors the sale price, all deductions and the profit made from the house. All proceeds must be paid directly to the bankruptcy trustee. If the proceeds are enough to pay off your Chapter 13 bankruptcy debts your case will be discharged.

During the 3 to 5 years a debtor is in Chapter 13 bankruptcy, he/she cannot acquire new debt (credit cards, bank loans etc.) without the permission of the bankruptcy trustee. While in Chapter 13 bankruptcy the debtor is put on a credit diet so to speak to insure that he/she does not recreate the situation that led them to bankruptcy in the first place. In other words, debtors in Chapter 13 bankruptcy are forced to live on their income only, plus repay old creditors. The Chapter 13 bankruptcy is a fresh start with your old creditors and could be endangered if you are paying new debt as well as the creditors in Chapter 13. Even if you are taking out a loan to pay off your Chapter 13 plan it is highly unlikely that a Chapter 13 bankruptcy trustee would approve the new debt. To the contrary the trustee may conclude that if you have enough money to pay for new debt then you may have enough money to pay more to your old creditors. This conclusion may cause the trustee to increase your Chapter 13 bankruptcy payments, so beware of what you ask for.

After filing for Chapter 13 bankruptcy remaining current with your mortgage payment is a requirement of your Chapter 13 confirmation order.  But as we all know, so much can happen over the 3 - 5 years of Chapter 13 bankruptcy. What if your income decreases drastically? What if you lose your job or become critically ill? And the big question, what if you fall behind on your mortgage payments?

If you fall behind on your mortgage payment during Chapter 13 bankruptcy, you mortgage company may send your attorney a written notice stating that you have missed your payments, or the mortgage company may ask the court to lift the automatic stay so they can aggressively pursue you for the money. If during Chapter 13 bankruptcy, you discover that your financial situation has changed and that you will miss a mortgage payment, notify your attorney immediately. Your bankruptcy attorney may be able to get you 60 - 90 days to catch up with your payments. What this means is that you must continue to pay the current mortgage payments, plus payments towards any back mortgage payments you missed. If your financial situation has changed permanently you can discuss converting your bankruptcy from Chapter 13 to a Chapter 7.

When people think about filing for Chapter 13 bankruptcy they often only think about their debts with companies such as credit cards and mortgage lenders. But filing for Chapter 13 bankruptcy requires that you list all debts including those personal loans you took out with friends and family. Failing to list all of your personal loans from friends and family in the Chapter 13 bankruptcy filing may cause your case to be dismissed. Another thing you need to remember is that you cannot legally give any preference to particular creditors. For example, if you are considering filing for Chapter 13 bankruptcy you are not allowed to pay off debts owed to family and friends while allowing credit card bills and mortgage payments to go unpaid. When filing for Chapter 13 bankruptcy, giving preference to particular creditors while mostly likely cause your case to be dismissed. If you are considering filing for Chapter 13 bankruptcy keep meticulous records of debts owed to family and friends as well as payments made, your case may depend on it.

A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. Chapter 13 is designed for individuals with regular income who want to pay their debts but are unable to do so in a timely manner. The purpose of Chapter 13 is to enable financially distressed individual debtors to propose and carry out a repayment plan under which creditors are paid over an extended period of time. During this time the law forbids creditors from starting or continuing collection efforts. After the commencement of a Chapter 13 proceeding, unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a consumer debt from any individual who is liable with the debtor such as a cosigner on a note. Consumer debts are those incurred for consumer, as opposed to business, needs. The Chapter 13 plan must, among other things, provide for the debtor to contribute that portion of his or her future income as is necessary to meet the terms of the plan.

Any individual, even if self-employed or operating an unincorporated business is eligible for Chapter 13 relief. Eligibility is contingent on the fact that the individual’s unsecured and secured debts are between certain dollar amounts that are adjusted annually by statute.

Upon the filing of the petition, an impartial trustee is appointed to administer the case. The primary role of the Chapter 13 trustee is to serve as a disbursing agent, collecting payments from debtors due under the plan and, in turn, distributing these payments to creditors.

Chapter 13 offers a number of advantages compared to chapter 7. A filing under this chapter offers an opportunity to stop foreclosure proceedings and may cure delinquent mortgage payments over time. You must however make all mortgage payments that come due during the chapter 13 plan on time. You can reschedule secured debts other than a mortgage for your primary residence and extend them over the life of your chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with you on consumer debts. This provision may protect your co-signers. Chapter 13 acts like a consolidation loan under which you make the plan payments to a chapter 13 trustee who then distributes payments to creditors. You will have no direct contact with creditors while under chapter 13 protection.