Chapter 13 Bankruptcy

Reasons to file Chapter 13

1. You need to save a house,
2. You need to save a car,
3. You need to deal with tax related debt,
4. You make too much money to file Chapter 7.

To qualify for a Chapter 13 you must demonstrate, through your bankruptcy documents, that you can pay into a 60 month plan the amount required by the bankruptcy code:

What goes into a Chapter 13 plan payment?

1. All secured debt (related to property) that you are keeping plus the current interest rate,
   • Liens on household goods can be made unsecured,
   • Judgments that impair your homestead exemption can be made unsecured
2. The value of tax liens with current interest,
3. All priority debt (tax assessed within the last 3 years and child support),
4. Attorney’s fees,
5. Trustee’s fees
6. At least 1% to unsecured creditors (not related to property)
   • The Trustee’s job is to increase this percentage
     • Can be increased if you keep a “luxury item”
     • Can be increased if you show “disposable income” upon a complete Means Test analysis. (To schedule a complete Means Test analysis, schedule a call back appointment with attorney Malinda M. Pennington. 844-322-6932)

If your income requires you to file a Chapter 13, the Bankruptcy Code requires the trustee to allocate “disposable income” to unsecured creditors.

Form B22C (the “Means Test”) is used to determine “disposable income”.

The Means Test looks at your income, household size, some actual expenses, and some national, standardized expenses. Using these factors the trustee determines what you are projected to have left over each month and what you will have over the next sixty months. The amount of disposable income over sixty months is the “base” of your plan. The base is the amount that must be paid by the Chapter 13 plan.

Expenses allowed in the means test:

• https://www.justice.gov/ust/means-testing
• Line by line explanation of the Chapter 7 Means Test
• Line by line explanation of the Chapter 13 Means Test
• To see the Chapter 7 Means Test form, click here.
• To see the Chapter 13 Means Test form, click here.

Chapter 13 is for individuals with unsecured debts less than $336,900 and noncontingent, liquidated, secured debts of less that $1,010,650.

Business Reorganization and High-Debt Individuals

Chapter 11 is, generally, used for business reorganization; however, individuals whose debts exceed the statutory limits in Chapter 13 may qualify to file under Chapter 11. A Chapter 11 debtor must offer a plan of reorganization that is “reasonably within prospect” and the debtor may retain property that is “necessary to an effective reorganization.”