How is the Chapter 13 plan calculated?
Chapter 13 bankruptcies allow for the restructuring of your Arizona debt. The trustee will appoint a repayment plan that covers a period of anywhere between three and five years. Upon the completion of the plan, the remaining debt will be discharged. How exactly is the Chapter 13 plan calculated? Can it be changed? Will it cover a three or a five-year period? These are all important questions that you will have to ask before opting for Chapter 13 bankruptcy filing.
Factors That Will Be Taken in Consideration
When your Chapter 13 payment plan is being calculated, the bankruptcy trustee will take a look at several important factors:
- Your income: to file a Chapter 13 bankruptcy, you need to have a regular, reliable source of income. Having a business, being paid a wage or getting rent from a property that you own can all qualify as such income.
- Your expenses: you will be required to provide the Arizona bankruptcy court with a detailed list of your monthly expenses.
- Disposable income: when expenses are subtracted from your income, your disposable income is being calculated. Very often, the disposable income will be the amount that Chapter 13 debtors will have to pay to creditors on a monthly basis.
- Your debt types and amounts: the amount and types of debt youa��ve accumulated also play a role in the payment plan calculation. A creditor has to provide the court with a document called Proof of Claim in which the exact amount will be outlined. The court will also examine priority and non-priority debt. Priority debt is the one that has to be paid in full under the Chapter 13 proceedings.
What Happens When the Disposable Income Is Not Enough?
There may be a situation in which the debtora��s disposable income is simply not enough to cover all of the priority debt. How are monthly instalments for Chapter 13 plan calculated in such instances?
A few options will be examined by court to help you deal with the situation. One of the simplest things you can do is increase your amount of disposable income. The goal can be achieved through an additional part-time job, the selling of assets and through a decrease in necessary expenses.
Such debtors will also get a five-year payment plan instead of a three-year plan under the Chapter 13 filing. The prolonged period will make it possible for them to cover priority debt, even if disposable income levels are insufficient.
There are Chapter 13 payment calculators online that can be used to get a more or less accurate estimate of the monthly instalment to expect. The calculation is based on debt amount, the length of the plan and the administrative fees.
Can a Chapter 13 Plan Be Modified in the Future?
The calculation made upon the bankruptcy filing isna��t necessarily going to be adequate for the entire duration of the Chapter 13 payment plan. It is possible to lose a job or a family member who contributes to the family income. Is it possible for the monthly installments to be reconsidered under such circumstances?
A recalculation can be made in the event of an emergency or a sudden change in lifestyle. If you become permanently disabled and you can no longer work, for example, you can request a modification of the plan by an Arizona court.
Whenever a bankruptcy plan has been confirmed (approved by the bankruptcy trustee and court), you will have to make a motion for a payment modification. You will have to explain the reason for the request and proof of the changed circumstances will also be needed. Depending on the information that you provide, the request will either be approved or denied and the former payment plan will remain valid. Always consult experienced bankruptcy lawyers to cover all bases before bankruptcy filing.