"How much will my monthly payment be?" is usually one of the first questions asked when someone is consider filing a chapter 13 bankruptcy case. Reaching the answer is complex and takes a little bit of analysis. It often requires accurate information from creditors, which is not readily available. Unfortunately, the monthly payment is sometimes one of the last questions that can be answered.
The first step is to determine what a debtor must pay. In order to qualify for Chapter 13 protection, creditors must receive at least as much in a Chapter 13 payment plan as they would get if debtor filed a Chapter 7 case. That means the creditors must receive the full value of property that is not exempt under the bankruptcy law.
Let's say John and Jane Smith want to file for bankruptcy using Chapter 13. To make it easy, I will use round numbers. They own a home that is worth $200,000.00. They have a mortgage on the house with a principle balance of $135,000.00. That means they have $65,000.00 of equity in their home.
That means if a Chapter 7 Trustee sold John's and Jane's home, the trustee would receive $65,000.00. Under the bankruptcy law, John and Jane could keep (exempt) about $47,000.00 from the sale of their home. That means $18,000.00 is not exempt and for the purposes of this article this is the only non-exempt assets. The creditors would get a share of $18,000.00 in a Chapter 7 bankruptcy. That means Jane and John will probably pay at least $18,000.00 through their plan.
This not the final figure. It can go up or down depending on other factors. I will discuss other factors in upcoming parts of this series.
If you want assistance, legal representation, or just want to know more about me, Mark M. Medvesky, or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.
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