Chapter 13 bankruptcy is sometimes called the “wage-earner’s bankruptcy.” The Chapter 13 Plan requires a monthly payment over a period of 36 to 60 months. Self-employed people cut a monthly check to the Chapter 13 trustee. People employed by companies get automatic deductions taken from their paychecks. When you file a Chapter 13, you are committing to an extended debt repayment plan. It is perfectly reasonable to want to know: How Much Will I Have to Pay in a Chapter 13 Bankruptcy?
The Chapter 13 Current Monthly Income Statement
Official Form 122C-1 is the so-called Statement of Your Current Monthly Income and Calculation of Commitment Period. And Official Form 122C-2 supposedly determines your Chapter 13 Calculation of Your Disposable Income. Some of the information used in the forms come from your personal records. Most of the information, however, comes from the Census Bureau and the IRS.
These forms purport to calculate your disposable monthly income. But the results they produce are often wildly inaccurate. Many types of deductions are disallowed, including children’s expenses, student loan payments, and other types of monthly expenses.
Schedule I and Schedule J
No rational person believes that the Current Monthly Income statement calculates a realistic computation of disposable monthly income. Chapter 13 trustees often look instead to Schedules I and J to determine disposable income.
- Schedule I: Your Income requires your employment and income information and provides for paycheck deductions. All income must be entered here, including rental income, domestic support obligations, and regular contributions to household income.
- Schedule J: Your Expenses requires you to list all of your expenses. Schedule J calculates your monthly net income. These schedules often reflect your true income more accurately than the Current Monthly Income Statement. You should carefully review with your attorney each line of your income and expense schedules before you file them.
Your monthly net income often determines your Chapter 13 plan payment. But not always.
The Chapter 7 Liquidation Test
Even though you have filed a Chapter 13 and not a Chapter 7, you still must pass the Chapter 7 liquidation test. See 11 U.S.C. 1129(a)(7)(A)(ii). This test requires that the unsecured creditors in your Chapter 13 case must be paid at least as much as they would if your case were filed under Chapter 7. For most Chapter 13 debtors, the liquidation test poses no problem. If you have significant assets, however, then you may need to pay more into your Chapter 13 Plan to protect the equity in those assets.
How Much Will I Have to Pay in a Chapter 13 Bankruptcy?
How much you will have to pay depends not only on your specific income and expenses, but also your debt and kind of debt. Secured and unsecured creditors receive different types of protections in Chapter 13. And your assets can affect your Chapter 13 plan payment, too. Talk to an experienced bankruptcy attorney to determine the probable range of your plan payment based on your specific lifestyle and circumstances.