The Primary Factors That Affect Your Repayment Plan in Chapter 13

One of the first things you might want to know before filing for Chapter 13 bankruptcy is how much your payments will be. Chapter 13 bankruptcy requires repayment of debts, but how do courts and lawyers calculate the amount of this payment and the length of the plan?

To accomplish this, they use a variety of factors, and here are the main ones.

Your Income

Your current wages affect two main parts of your Chapter 13 case. The first part is the amount you pay each month for your repayment plan payments. To determine your payments, the court must look closely at your income amount. They will compare this amount to the debts you have. From there, they will decide how much you can afford to pay for the repayment of your debts. This factor also determines how much money you get to keep each month.

The second way your income affects your case is by determining how long the plan lasts. You will either get a three-year plan or one that lasts five years. You cannot choose which one you get. The court bases it on your income by comparing your wages to average salaries in the state.

The Types of Debts You Have

In bankruptcy cases, courts classify debts in two distinct categories. The first is priority debts, which refer to money you owe that you must repay in full. Your mortgage is an example of a priority debt. Other examples include child support and IRS back taxes.

The other category is non-priority debts. You may or may not have to repay these in a Chapter 13 case. Credit card bills fall into this category. Your income plays a role in deciding if you repay these types of expenses or not.

Your Other Expenses

The last factor that matters in Chapter 13 cases is the other expenses you must pay. The court will not leave you penniless after making your required payments for your case. They must let you keep enough money from your paychecks to cover ordinary expenses you have in life. This money is what you will use to pay for gas in your car, groceries, and other everyday costs in life.

To find out how much your payment plan would be, you will need to meet with a bankruptcy lawyer to discuss your situation. To do this, call a law firm to schedule a consultation with a Chapter 13 bankruptcy lawyer.