The majority of individuals seeking bankruptcy protection file a Chapter 7 or Chapter 13 case. Generally speaking, if your monthly income is less than your monthly expenses, you should consider a Chapter 7 filing. In addition to other factors, if your monthly income is more than your monthly expenses, you should consider a Chapter 13 filing.
A Chapter 13 bankruptcy requires you to file a plan of reorganization, which sets forth how you intend to wholly or partially pay your unsecured creditors. If your income is below the median income for a household of your size, your Chapter 13 plan will last for 3 years. If your household income is above the median income for a household of your size, it will last for 5 years. Your monthly payment is based upon your “disposable income,” which is how much is left after you pay your basic, necessary expenses.
When determining how much disposable income you have for Chapter 13 purposes, you are given dollar for dollar credit for some, but not all, of your expenses. IRS standards are used for some categories of expenses.
Since your unsecured creditors can’t receive less in a Chapter 13 than they would have received had you filed a Chapter 7, sometimes you will have to pay the liquidation value of your non-exempt assets to your unsecured creditors in a Chapter 13, as opposed to your monthly disposable income.
Please keep in mind that every bankruptcy matter is different. If you are interested in filing a Chapter 13 bankruptcy, and have questions about how much you would pay to your creditors, contact our office to schedule a no-cost consultation by completing the form on this website or calling us at (954) 932-5377.