Sacramento Bankruptcy: What Factors Determine the Percentage Payout Creditors Must be Paid?

The law dictates that many factors go into determining how much individual unsecured creditors will receive in a Chapter 13 bankruptcy.  Monthly income and expenses of the debtor is the primary factor which determines what percentage of debt will be eliminated in your repayment plan.  After accounting for household necessities, the balance of income must be paid to creditors.  At the end of the life of your plan, unpaid debt is then discharged.

Another significant factor in determining the plan payments is the value of your assets and real estate.  Law requires that Chapter 13 debtors pay at least what creditors would have received in a Chapter 7 liquidation bankruptcy.  As a result, if you own non-exempt property that Chapter 7 would have required to be sold, then a Chapter 13 plan must pay back unsecured creditors at minimum the value of that non-exempt property.

An additional common factor in determining Chapter 13 repayment percentages is the “means test.”  The means test is determined by analyzing your gross income for the six months prior to filing minus average tax liability and expenses for your car and home.  If debtor incomes are in excess of the average Sacramento household, then the percentage to be paid to creditors will be determined by the means test.  In the cases where the means test applies, the means test will determine the payments and percentage payout to creditors rather than the household budget.

The most important thing to remember is that Chapter 13, despite being a repayment plan, does not mean that all debt must be repaid.  For a personalized analysis, contact one of Sagaria Law ‘s experienced Sacramento attorneys immediately.

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