When you file a Chapter 13 bankruptcy, you will submit a plan of repayment for the court’s approval. The plan will set forth what your creditors will be paid over a period of three to five years. Once the court confirms (approves) your plan, you will make monthly payments to the trustee who distributes the funds according to the terms of your plan.
So, how do you determine the amount your creditors will be paid? Everyone you owe money to is given notice of your filing and a deadline to file a Proof of Claim. This claim sets forth the amount the creditor believes is due to them. The trustee reviews the filed Proof of Claims to determine the amount of funds that must be paid in order to pay all of the claims under the terms of your plan. It is important to note that the plan must pay priority claims, secured claims, legal fees, trustee’s fees, and a percentage (0-100%) to the unsecured creditors.
The “base” of your plan is the total amount to be paid under your plan. For example, if you pay $200 per month to the trustee over a period of 36 months, your base is $7200. Your plan is considered to be “infeasible” if the amount required to pay the claims exceeds the “base” amount. In other words, “infeasible” means that you cannot pay all of your debts as set forth under the plan. If your plan is considered infeasible (you can’t afford it), your attorney can amend the plan to resolve the infeasibility. A few ways you can cure infeasibility and make your plan affordable are:
- increase the amount of your monthly payments
- increase the duration of the plan (if it is under 5 years)
- make a lump sum payment
- file a motion to modify your plan to change the amount paid to unsecured creditors
- propose a gradual increase in monthly payments after a certain time period passes.
If you are interested in learning more about filing a Chapter 13 bankruptcy, call DeLadurantey Law Office today.
For your bankruptcy, foreclosure, and debtor’s rights matters, contact DeLadurantey Law Office, LLC at (414) 377-0518. We serve the counties of Milwaukee, Waukesha, Kenosha, and Racine, including such areas as Milwaukee, Merton, Delafield City, Waukesha City, and Kenosha. Visit our web site and like us on Facebook.