Chapter 13 Payment Plan
Filing for Chapter 13 bankruptcy involves mostly the same forms as you would use for filing a Chapter 7 bankruptcy. This involves listing your income, property, expenses, and debts. You will need to file these forms and paperwork along with a workable payment plan proposing how you plan to handle your debts over the payment plan period with the bankruptcy court.
In addition, you must also file your tax return for the previous year. This prooves that you have filed your tax returns for the last four years. You must also show a certificate presenting that you’ve completed credit counseling with an agency approved by the United States Trustee.
Under a Chapter 13 plan, you would normally make monthly payments to the bankruptcy trustee. This is an official appointed by the bankruptcy court to oversee your case. The trustee in turn pays your creditors and collects a statutory commission based on the amounts paid out under your plan. It is important to remember to make every payment on time in order to successfully complete your plan and get a discharge of your remaining debts.
Some creditors are entitled to receive 100% of what you owe them; while others may receive a much smaller percentage or sometimes nothing at all. Normally, Chapter 13 bankruptcy plans must provide that:
Administrative claims will be paid 100%. Including:
• your filing fee
• the trustee’s commission (3% to 10% of each monthly payment)
• attorney’s fees, if you happen to hire an attorney
Priority debts will be paid 100%. Including:
• back alimony and child support
• most tax debts including state and federal income taxes
• wages, salaries, or commissions you owe to employees
• contributions you owe to an employee benefit fund
Mortgage defaults are paid 100% if you want to keep your house.
Other secured debt defaults are paid 100% if you want to keep the property. Missed car payments also fall within this category.
Unsecured debts are paid anywhere from 0% to 100% of what you owe. The exact amount depends on:
• the total value of your nonexempt property
• the amount of disposable income you have each month to put toward your debts
• how long your plan lasts
Furthermore, your payment plan pays any leftover disposable income. This is your income less certain allowed expenses and payments on secured loans, towards your unsecured debts, such as credit card debts and medical bills.
The length of your payment plan will depend on your income level. For instance, if your income exceeds the median monthly income for a household of your size in your state, your plan must last five years. On the other hand, if your income is less than the median, you may propose a three year plan, even if your unsecured creditors cannot be fully repaid during that time.