What is a Repayment Plan in a Chapter 13 Bankruptcy in Nevada?
What makes a Chapter 13 bankruptcy unique from other bankruptcy chapters is the repayment plan. It is a detailed document that presents how a debtor will pay off his or her debts to the creditors and how much each creditor will be paid on a bimonthly or monthly basis. The payments are generally made to the creditors through a trustee.
Understanding the Repayment Plan in a Chapter 13
The repayment plan will have to be created and filed 14 days after filing a petition in a bankruptcy court, unless an extension is sought from and granted by the court. Upon receipt of the plan, the judge and the creditors will review at the document to assess its feasbility. The approved repayment plan will then be implemented.
Your Debt Classification
It is important to know how your debts are classfied to have a better understanding of your creditors’ claims. And your repayment plan should show categorization of these debts
Priority Debts. These are debts that must be necessarily paid, and in full, in the inclusive repayment years. These include:
* taxes you owed recently;
* wages owed to employees;
* cost of bankruptcy filing and proceeding; and
* child-and-spousal support payments.
Secured Debts. These are debts where the creditors have the right to take back a property of the debtor in his failure to repay the debt. The examples given below fall under this debt category:
* home mortgage; and
* car loan.
If you wish to retain these property, you have to pay the regular monthly and overdue payments, or return the property to the creditor.
Unsecured Debts. These debts have the possibility of not getting fully paid by the end of the repayment period. When this happens, these debts may be discharged or wiped out in the end. Examples of these debts are:
* medical bills;
* credit card debts; and
* unsecured personal loans.
These debts do not give your credtors the right over your property.
How to Create a Repayment Plan
Each repayment plan is unique as this will depend on your debt situation. The length of repayment years likely will have to be based on the means test.
There are other considerations on how much regular payments you will have to make while creating the plan, such as your:
- disposable income;
- monthly income; and
- income will be sufficient enough to cover all your obligations as required by the banruptcy law.
Computing Your Repayment Plan
While on the repayment plan, you are required to pay your debts equal to the amount of your disposable inocome. The formula below shows how your monthly disposable income will be computed:
Your Monthly Earning – Your Monthly Reasonable Expenses = Disposable Income
Here is a list of your monthly reasonable expenses, to support and maintain your family’s needs:
- insurances (health and disability);
- house rent or mortgage payments;
- prescribed medications and medical bills;
- elderly and child care;
- child and spousal suppot payments;
- tuition fees and educational expenses; and
- trustee fees, whichis generally 10% of the total plan payments.
What Happens if Your Disposable Income is Not Enough?
If your monthly disposable income is not enough to cover payments in your repayment plan, then most likely the trustee will not go for it. However, there are remedial options to possibly address issues such as this, as per list below:
- sell assets;
- change employment or take additional jobs;
- decrease expenses; and
- use anticipated tax refunds.
Can a Chapter 13 Plan be Modified?
Your repayment plan may be modifed given the following scenarios:
- your mortgage plan has changed;
- you are have a new child;
- you lost your job;
- you want to give up your house and/or your car;
- you have a pay cut;
- you need to keep a tax refund; and
- you want to add a creditor that you might have unintentionnally left out of the plan.
Should you wish to modify your repayment plan because of one or more reasons mentioned above, you need to file a plan modification with the court. It must include your reason/s for modification and how you want it modified by presenting evidences before the court.
If no objection is filed by the trustee and your creditors, most likely, your plan will be modified after submitting an order to the court. On the other hand, if objections to the plan modification are filed beyond own resolution, then you have to go before the judge.
Nevada Bankruptcy Lawyers at Freedom Law is Here to Help
Creating your own repayment plan seems practical and personal as you know best your current debt situation. However, a lot of technical details have to be considered which makes it complicated. Working with a legal expert in the creation of your plan will make sure that all details are meticulously assessed and looked into, for greater chances of getting your plan approved.
If you are looking into filing for Chapter 13 bankruptcy, creating a repayment plan, and you need experts to consult with and guide you through the process, we are ready to help. Please request a call-back by submitting a short online form. All initial consultations are free and confidential.