A chapter 13 bankruptcy is often referred to as the “wage earner’s bankruptcy.” Chapter 13 allows you to create a payment plan to allow you to pay back your creditors over a three to five year time period. The amount of debt you will have to pay back depends on what is called the “means test,” in short it looks at your income for the last six months and compares it to the median income of the state you live in. In a chapter 13 bankruptcy, each month one monthly trustee payment is made to the chapter 13 trustee. The chapter 13 trustee then disburses money to each creditor.
Chapter 13 Payments
How much will my trustee payment be? First we must look at each category of debt you owe, that together make up your trustee payment. There are different classifications for each type of creditor that you owe. First is priority claims. Priority claims are comprised of attorneys’ fees, priority taxes and past due domestic support obligations. Second is secured debt. Secured debt is typically comprised of your on going mortgage payment, arrears for your mortgage, car, and some furniture accounts. These first two categories will be paid through the plan, unless you decided to surrender the collateral attached to the debt (an example of collateral is the home or vehicle). The last group is unsecured debt. Unsecured debt is typically comprised of medical debt, pay day loans, credit cards, and signature loans. The amount you have to pay back to this last category (unsecured) depends on your “means test,” you could pay back as little as 1% to your unsecured creditors. Lastly, the trustee fee. The trustee takes a fee for administering your case. After we have totaled each category, we combine these numbers and divide by your plan period, 36 months for a 3 year plan or 60 months for a 5 year plan, to find out your chapter 13 trustee payment.
Developing a repayment plan in a chapter 13 is done in conjunction with your attorney. There are other factors that go into a repayment plan that may cause the payment to be higher or lower than the amounts described above. Contact us at 713-869-9200 or complete the free consultation form on the right to review possible options and set up a free initial consultation.
Written by Regina Sanchez, an attorney with Baker & Associates.