Chapter 13 Repayment Plan
A Chapter 13 Repayment Plan lasts three to five years. If your income is under the median income in California you may be able to get a three year plan approved if on the other hand your income is above the median income in California for your household size you will have to submit a five-year plan. For calculation of your median income read the page about means testing under Chapter 7 on this website.
What must be paid in Chapter 13 ?
Some debts have to be paid in full in a Chapter 13 plan. You must have enough income to pay off your priority debts in full within three to five years. Typical priority debts are back income taxes and back child support. For a quick test whether you qualify for a Chapter 13 plan, take your income during the last six months, divide it by six and multiply it by sixty. This is your total income for five years. Then add up your monthly living expenses and multiply them by sixty. Subtract the total of your expenses from the total of your income. This is your disposable income. Finally subtract the total of your priority debts from your disposable income. If the number is zero or more you will qualify for a chapter 13 plan.
How much high must your monthly payments be ?
If you have assets your payments must be equal or more than the value of your nonexempt assets. The reason is that if you filed for Chapter 7 you would have to give up all your nonexempt assets. Therefore if you want to keep assets that are over the exemption amount allowed by California law the bankruptcy code requires that you pay the same amount to the unsecured creditors such as credit card companies. Let's say you own a care worth $10,000.00 but you can only exempt $3,300.00 so that your nonexempt equity in the car is $6,700.00. In your plan you have to pay to the unsecured creditors at least $6,700.00 over the life of the plan to make up for the asset you get to keep.