Redwood City Bankruptcy: Chapter 13 Creditor Pay Out Factors

As stated previously, there are many factors that will determine how much any particular general unsecured creditor will be paid in a Chapter 13 Bankruptcy. The most common factor to determine the percent of your payment of your debt, and the percent of your debt that will be eliminated is the amount of your monthly income and expenses. Any income remaining after providing for your household necessities must be paid to your creditors. Once this income is paid over the life of your plan, the unpaid debt it is discharged.

Another factor that affects the amount of your payment through chapter 13 is the value of your assets, including real estate. Chapter 13 requires a debtor to pay at least as much as general unsecured creditors would have received in a chapter 7 liquidation bankruptcy. Very often, though, this amount is zero. Nonetheless, if you own non-exempt property that could have been sold in chapter 7, your Chapter 13 plan must provide for payment of at least that much amount of money to general unsecured creditors.

The final common factor to determine what percentage of your debt will be eliminated is your average gross income over the six months prior to filing,  minus certain allowable deductions, such average tax liability and expenses related to the ownership of a home or a car. This is known as the “means test” and can affect debtors whose incomes exceed the median income for a family of their size in their state. If your Redwood City-area household makes above the average median income for the state in which you live, the percentage paid to your general unsecured creditors will be determined by the results of this “means test.” The result of the monthly means test analysis, despite your monthly budget will determine how much total must be paid back to general unsecured creditors, and hence, how much of the overall general unsecured debt can be eliminated.

Keep in mind, just because Chapter 13 Bankruptcy is a repayment plan does not mean you have to pay all of your debt! To find out if how much debt a Chapter 13 Bankruptcy would help you eliminate, contact a Sagaria Law Redwood City attorney immediately.

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