How Much Should You Expect to Pay to Creditors in a Chapter 13 Bankruptcy?
Put simply, Chapter 13 is a type of bankruptcy that requires those who file it to come up with a reorganization plan that will go on for anywhere between three and five years. Under this plan, the debtor comes up with monthly payments to make on their debts. Some of those debts must be paid off fully in order for the bankruptcy to eventually be discharged.
One of the most common questions we get at California Bankruptcy Relief regarding Chapter 13 bankruptcy filings is how much they’d have to pay in total. The truth is that every plan is unique. That said, there are some principles that apply to most Chapter 13 cases. Read on to get some key info about the options and then reach out to us at (888) 748-0025 for a free bankruptcy consultation.
Figuring out how much you’ll pay in Chapter 13
The exact city you live in will be the deciding factor in where you file bankruptcy. For example, citizens of Roseville, Sacramento, and Folsom will file in U.S. Bankruptcy Court for the Eastern District of California. Your bankruptcy attorney will assist you with the filing process so that you know where to file.
Once you’ve filed, you’ll be assigned a trustee by the court. This is the person who’s going to oversee your bankruptcy proceedings and will distribute your monthly payments to your creditors. How much and how they’ll be paid will depend on how the debts are categorized. In most cases, debts are paid in this order:
- Secured debt – a home, car, etc.
- Priority debts – child support, taxes, alimony, etc.
- Unsecured debts – credit cards, medical debt, personal loans, etc.
In most cases, a person who files Chapter 13 bankruptcy will be required to pay all their secured debts and all of their priority debts, plus interest.
On the other hand, unsecured debts don’t always have to be paid in full but you must pay at least the amount that the creditor would have gotten if you’d filed Chapter 7. This is called the “best interest of the creditor” test.
Finally, when you file Chapter 13 the trustee will determine your real costs and all of your disposable income must go toward paying debts. You may get approved for a three-year plan or you may have to do this for five years. Which plan you get approved for will have a large impact on how much you pay in total.
Now is the time to talk to a bankruptcy attorney
If you’re curious about how much you’d be expected to pay when filing Chapter 13 bankruptcy, or even if filing bankruptcy is the right choice for you, then we encourage you to contact California Bankruptcy Relief at (888) 748-0025. We’ll start with a free consultation to answer your questions and help you find the best way forward.