How Much Do You Have to Pay Back in a Chapter 13 Bankruptcy in California?
How Much Do I Have to Pay in Chapter 13? If you are a resident of Folsom, Sacramento, or Roseville who plans to file for Chapter 13 bankruptcy, you will likely do so in U.S. Bankruptcy Court for the Eastern District of California, which has jurisdiction over Sacramento and Placer Counties, among many others. Your Roseville Chapter 13 lawyer will assist you with this process and the documentation that is required. The court will assign a person called a “trustee,” who will oversee the bankruptcy proceedings, to your case. One of the trustee’s most important jobs is to distribute your monthly payments to your creditors according to how your debts are categorized. Generally speaking, debts are paid in the following order in Chapter 13:
1. Secured Debts – Debts secured by collateral, such as mortgage debt, where the collateral is your house.
2. Priority Debts – Debts which are given special priority despite not being secured by collateral. Examples include alimony, child support, certain tax-related debts, and any earnings you may owe employees, where applicable.
3. Unsecured Debts – This category covers all other debts, ranging from medical debt to personal loan debt to credit card debt. Chapter 13 debtors are generally required to pay secured debts and priority debts in full, plus interest. Unsecured debts are of lesser importance in bankruptcy. Creditors holding unsecured claims are not necessarily required to be paid in full, but must receive at least the amount they would have received if you had filed for Chapter 7 bankruptcy. This standard is called the “best interest of creditors test.” Moreover, Chapter 13 cases require the debtor to put all of his or her disposable income toward the plan. Additionally, some debtors are approved for a three-year plan, while others are required to disperse payments over a period of five years, which, perhaps needless to say, can have a significant effect on payment amounts. These factors – the duration of your repayment plan, the amount of disposable income you have, and your ratio of secured debts to unsecured debts to priority debts – all have an impact on the amount you will pay in order to satisfy your Chapter 13 plan. If the plan becomes too expensive and unmanageable while the case is underway, you may be required to convert your case to a Chapter 7 bankruptcy.