Chapter 13

Bankruptcy -Chapter 13



The courts require your attorney to disclose the difference of between the Chapter 13 and Chapter 7 to their clients. This helps to remove the confusion between between the two. Please see the webpage elsewhere on this website for Chapter 7 information.


Chapter 13 Process


Chapter 13 is often called a “Debtor’s Court” or a “Wage Earners Plan”. This is a repayment plan, and the easiest way to see if you qualify is to roughly calculate a total all of your debts and divide them by 36 months or 60 months. If you cannot afford that payment plus paying your current living expenses you will need to re-evaluate whether this is the right plan for you.


Chapter 13 Plan


An easy example to explain how this works is to follow this example through with me. This does not include additional expenses for the trustees fees and court costs which will be added to your debts. (This example is helpful only to give you an insight into the process and is not intended to be an exact calculation for your particular circumstance.)




If you have a total debt of $36,000 to pay that off you have several options. You can pay it off over three years or five years. This is 36 months or 60 months respectively. If you were to pay it off in 36 months it would take approximately $1000 per month. If you were to pay it off and 60 months it would take approximately $666.66 per month. The same that you elect to pay it off and 36 months. That would be $1000 per month. If you have living expenses that total $1500 per month that means that you would need an income of approximately $2500 per month. If you cannot afford that then you would elect to pay it off at a slower rate over five years that would be at the rate of $666.66 per month.






Therefore, it is very important that you determine how much you can afford on your repayment plan. You must also then determine with a great deal of accuracy, what are your monthly living expenses. This is the single biggest mistake that people make in considering Chapter 13. They fail to correctly determine their monthly living expenses and have a tendency to “round off” the numbers.



When you come to my office you’ll be given a package of forms to complete, but prior to coming to my office it would be helpful for you to get as precise figures as you can as to what you spend on your monthly living expenses. These expenses must include your rent or mortgage, your utility bills, your cell phone, food budgets and other expenses that you normally have each month. If you owe for an automobile, you will be required to put your car payments into the plan so you do not and need to include those payments as a part of your monthly expenses. If you’re behind on your mortgage or your rent you can include that in your plan. The point is, you must be assured that you can pay your living expenses before you can follow a plan of repayment called a “Chapter 13”



This example above is simplistic and does not include additional costs which will be a part of your bankruptcy repayment plan (such as the Trustees fees) but does give you a general idea on what is necessary to file a Chapter 13.


Please call me to discuss how I can help you through this difficult time. We have a lot of information and different payment arrangements which can make to help you make the right decision.