Navigating Chapter 13 Bankruptcy: Understanding Your Repayment Obligations

Are you considering a Chapter 13 bankruptcy? It’s essential to understand the debts you will be responsible for repaying. At James H. Wilson, we provide guidance to help you through the bankruptcy process.

Initiating a Chapter 13 bankruptcy requires the submission of numerous forms detailing your earnings, assets, expenditures, and liabilities, closely mirroring those used in Chapter 7 cases. Additionally, certification of completed credit counseling, your last year’s tax return, and evidence of tax filings over the previous four years are mandatory.

Upon submission of these documents to the local bankruptcy court, you must present a feasible strategy for managing your debt throughout the plan’s duration.

Payments made under the Chapter 13 arrangement are channeled monthly to a court-appointed trustee who, in turn, disburses the funds to creditors and receives an authorized commission. It is critical that you stay current with these payments as per the plan.

Determining Your Payment Amounts

Your obligations under Chapter 13 bankruptcy can vary significantly. While certain debts require full repayment, others may necessitate a partial payback, or none at all, including:

• Full payment of administrative claims, such as filing fees, trustee commissions, and legal costs if you enlist an attorney.
• Priority debts merit complete reimbursement—this encompasses child support, most tax obligations, employee wages, and employee benefit fund contributions.
• Secured debt repayments, like those for vehicles, must be fully satisfied if retaining the property is your intention.
• The amount paid towards unsecured debts is influenced by your disposable income, the value of nonexempt property, and the duration of your plan.

Understanding “Exempt” Property

State-specific exemption laws dictate which possessions you can keep in Chapter 7 and the allowable values. Commonly protected items include healthcare devices, personal effects, home furniture, clothing, and limited equity in a car or residence, among others.

Under Chapter 7, nonexempt assets are liquidated, but Chapter 13 permits you to retain them, provided your repayment plan accounts for the value of those items.

In Chapter 13, any remaining disposable income after essential expenses and secured debt payments should also contribute to settling unsecured debts, like credit card bills or medical expenses.

The term of your plan hinges on your earnings compared to the median for similar-sized families in your state. Depending on whether your income is above or below this median, your plan could extend for three or five years.

WARNING: “Current monthly income” calculations, based on a six-month average, may not reflect your present financial state, especially if a recent job loss has occurred. This discrepancy may affect the duration of your repayment plan.

If you’re navigating the complexities of a Chapter 13 bankruptcy, the team at James H. Wilson is prepared to assist you. Contact us at 804.740.6464 for personalized legal support and to ensure that your repayment obligations are met fairly and efficiently.