If you do not meet the income qualifications for a Chapter 7 case, you may want to consider restructuring your debts through a Madison Chapter 13 case. Chapter 13 allows individuals and couples to develop an affordable payment plan for their debts. However, a concern many people have about filing Chapter 13 is how much they will pay each month.
Chapter 13 Bankruptcy is a Debt Repayment Plan
There are many reasons why Chapter 13 might be the best debt relief option for you. Some benefits of filing a Chapter 13 bankruptcy case in Madison, MS include:
- Pay what you can afford to pay to your unsecured creditors to get rid of credit card debt, medical bills, and other unsecured debts
- Save your home from being foreclosed by spreading out past-due mortgage payments
- Stop creditor harassment and debt collection lawsuits
- Prevent vehicle repossession and potentially lower your car loan payments or even the amount you owe on your car loan
- Get rid of a second mortgage if you more on your first mortgage loan than your home is worth
- Pay back taxes, child support, and spousal support payments over five years
- Protect property that would have been lost had you filed a Chapter 7 bankruptcy case
Most Chapter 13 bankruptcy plans are calculated based on 60 monthly payments. However, some debtors may qualify for a three-year bankruptcy plan. Your Madison bankruptcy attorney works diligently to get your Chapter 13 payment as low as possible, given the facts of your case and the bankruptcy requirements.
How Is a Chapter 13 Bankruptcy Plan Payment Calculated?
Each Chapter 13 case is unique. Your bankruptcy plan is based on your financial situation. There are requirements for bankruptcy plans that apply in all cases. Therefore, we must work within bankruptcy laws when calculating your Chapter 13 plan payment.
However, our Madison Chapter 13 bankruptcy attorney has extensive experience filing Chapter 13 cases. He carefully analyzes your financial situation and works to get your payment as low as the law allows.
Several factors impact the amount of your Chapter 13 plan payment.
Payment of Priority Unsecured Debts
Some unsecured debts must be paid in full through your Chapter 13 plan. These debts are called priority unsecured debts. Examples of priority unsecured debts that are paid in full when you file a Chapter 13 bankruptcy case include:
Mortgage Arrearage
The total of your past-due mortgage payments, interest, penalties, and foreclosure costs.
If you choose to surrender your home because you owe more than the home is worth or you merely do not want the home, you do not have to pay back this money. You only pay a percentage of any money that the mortgage company does not recover when it sells the home through foreclosure.
Income Taxes
If you owe income taxes, you must pay the priority portion of these taxes in full through the Chapter 13 plan. However, a portion of the taxes might be considered general unsecured debt based on the age of the tax debt. If so, you may only be required to pay a portion of the income taxes in full.
Domestic Support Obligations
If you are behind on your child support or alimony payments, you must pay those amounts in full. However, you have up to 60 months to pay the past due amount through Chapter 13. You must remain current on all future domestic support obligations while you are in Chapter 13.
Administrative Fees
The fee for the Chapter 13 trustee is paid through your Chapter 13 plan. The fee is based on a percentage of your Chapter 13 plan payment.
Payment of Secured Loan Payments
In most cases, debtors pay their regular mortgage payments outside of the Chapter 13 plan. However, they include their car loan in the plan payment. By including your car loan in your Chapter 13 plan, you might be able to reduce your monthly car payment.
Depending on when you obtained the car loan, you might be able to reduce the amount you owe on the car to pay off the car loan. You might also be able to reduce the interest rate on your car loan. Spreading out the car loan payments over 60 months could significantly reduce the payment each month.
Payment of General Unsecured Debts
General unsecured debts include medical bills, personal loans, most judgment debts, and credit card debts. The amount you pay unsecured debts depends on your disposable income.
Your disposable income is the amount of money you have each month after deducting allowable monthly expenses. The Means Test calculates your disposable income based on your average income for the six months before filing a Chapter 13 bankruptcy in Madison, MS.
The percentage paid to unsecured creditors ranges from 1% to 100%. The higher your disposable income, the higher your percentage paid to unsecured creditors. Our Madison Chapter 13 bankruptcy lawyer carefully analyzes your monthly expenses to maximize the allowable deductions from your monthly income to keep the amount of your disposable income as low as possible.
The Impact of Non-Exempt Equity on Chapter 13 Plan Payments
Bankruptcy exemptions protect specific amounts of equity in certain property. Exempt equity in assets cannot be used to repay debts. However, if you have high-dollar assets with non-exempt equity, your Chapter 13 plan payment could increase.
In a Chapter 7 case, the Chapter 7 trustee would liquidate assets with non-exempt equity. That money would be used to pay your unsecured debts. Therefore, in a Chapter 13 case, you must pay an amount equal to the non-exempt equity to the unsecured creditors.
However, you can argue that some of that money would not be paid to the creditors in a Chapter 7 case. For example, the Chapter 7 trustee would receive a percentage of that money, and some of the money would be used for administrative costs. Therefore, it is essential to work with an experienced Chapter 13 bankruptcy attorney in Madison who understands how to argue for the lowest possible payment to unsecured creditors.
Other Factors That Could Impact Your Chapter 13 Plan Payment
Your financial transactions over the past several years could also impact your Chapter 13 plan payment. For that reason, using online Chapter 13 calculators is not in your best interest. Working with an attorney who allows a software program to calculate your plan payment may not be wise.
At Saxton Law, PLLC, we want to help you achieve a Chapter 13 plan payment that is affordable. Our Madison bankruptcy attorney analyzes every aspect of your Chapter 13 case and calculates the lowest possible payment to propose to the court and the Chapter 13 trustee.
In some cases, the Chapter 13 trustee or the bankruptcy court may propose a higher plan payment. If so, we will aggressively continue to pursue the lowest possible payment based on your financial situation. We want to help make Chapter 13 affordable so that you can pay off debts and rebuild your financial stability.
Contact Our Madison Chapter 13 Bankruptcy Attorney for a Free Consultation
It is exhausting, frustrating, and stressful to deal with debts you cannot pay. However, filing a Chapter 13 bankruptcy could be the best solution to your debt problems. At Saxton Law, PLLC, we understand how difficult it can be to deal with a debt problem. Our goal is to help you find an affordable debt-relief solution.
Call our office at (601) 790-0529 now to speak with a member of our legal team. You may also schedule your free consultation online with our Madison bankruptcy attorney.