In Georgia, your Chapter 13 bankruptcy payment plan hinges on your disposable income and debt types.

• Disposable income: This is calculated by subtracting necessary expenses (housing, food, transportation) from your gross income.
• Debt types: Priority debts (taxes, child support) must be paid in full. Secured debts (mortgages, car loans) require catching up on arrears and potentially restructuring the loan. Unsecured debts (credit cards) may be partially discharged based on available funds.

Chapter 13 and Debt Repayment

Filing for bankruptcy can be daunting, but it can also provide much-needed relief for those struggling with overwhelming debt. One of the most common forms of bankruptcy for individuals is Chapter 13, which involves creating a repayment plan to pay back creditors over a set period.

Knowing how a debt repayment plan is calculated in Georgia is crucial for anyone considering this option. While it is essential to consult with a Georgia bankruptcy lawyer about details, this comprehensive guide will walk you through the various factors and steps involved in calculating a Chapter 13 payment plan, ensuring you are well-informed and prepared.

Chapter 13 – Bankruptcy Basics

Chapter 13 bankruptcy, often referred to as the “wage earner’s bankruptcy,” allows individuals with regular income to develop a plan for repaying all or part of their debts. Unlike Chapter 7 bankruptcy, which involves liquidating assets to pay off debts, Chapter 13 focuses on restructuring debt and creating manageable payment plans.

This type of bankruptcy can help individuals keep their homes and other valuable assets while addressing their financial obligations. However, the key is staying current on the debt repayment plan, so you need to know what to expect financially. This factor is the reason many debtors ask: How is a chapter 13 bankruptcy payment plan calculated in Georgia?

Eligibility to File Chapter 13 Bankruptcy

Eligibility for Chapter 13 bankruptcy is determined by several factors, including income, monthly expenses, payroll deductions, and debt levels. To qualify, an individual must have a regular income and unsecured debts of less than $419,275 and secured debts of less than $1,257,850 (these amounts are adjusted periodically).

Additionally:

• You cannot have had a bankruptcy petition dismissed in the previous 180 days due to willful failure to appear before the court or comply with court orders.
• A waiting period is required after filing a Chapter 7 or Chapter 13 case, so you must allow it to pass before you can file another Chapter 13 case.

How Debts Work Under the Bankruptcy Code

Priority Debts: Priority debts are obligations that must be paid in full through the Chapter 13 repayment plan. These include debts such as:

• Domestic support obligations (e.g., child support and alimony)
• Certain taxes
• Administrative expenses (e.g., trustee fees and attorney fees)

Because these debts have priority over other types of debt, they must be paid before unsecured creditors receive any payment.

Secured Debts: Secured debts are those backed by collateral, such as a mortgage or car loan. In a Chapter 13 bankruptcy, secured debts are treated differently than unsecured debts. The debtor must continue making payments on secured debts to retain the collateral. If the debtor is behind on payments, the repayment plan can include provisions to catch up on arrears, allowing the debtor to avoid foreclosure or repossession.

Unsecured Debts: Unsecured debts, which are not backed by collateral, include obligations like credit card debts, medical bills, and personal loans. In a Chapter 13 plan, unsecured creditors may receive a portion of the debtor’s disposable income, but they are typically paid after priority and secured debts. The amount that unsecured creditors receive depends on the debtor’s disposable income and the total amount of unsecured debt.

Chapter 13 Payment Plans in Georgia

In Georgia, as in other states, secured payments are made to a bankruptcy trustee who then distributes the funds to creditors. The payment plan typically lasts three to five years, depending on the debtor’s income. If the debtor’s monthly earnings fall below the state median income level, the plan will generally be for three years unless the court approves a longer period. Conversely, if the debtor’s income is above the median, the plan must last for five years.

Facts About the Chapter 13 Repayment Plan

The Chapter 13 repayment plan is a detailed document that outlines how the debtor will repay creditors over the designated period. This plan must be submitted to the bankruptcy court for approval. The repayment plan includes information about the debtor’s income, expenses, and debts, as well as how much each creditor will be paid. Adjustments to the plan may be made if the debtor’s financial situation changes during the repayment period.

Calculating Your Monthly Payment in a Chapter 13 Plan

Determining the monthly payment in a Chapter 13 plan involves several steps and factors. First, the debtor’s “current monthly income” is determined, which includes all income received in the six months prior to filing.

Next, allowable expenses, as defined by IRS standards and local costs of living, are deducted from the current monthly income to calculate “disposable income.” This disposable income is then used to determine the amount available to pay creditors each month.

Learn Whether You Earn Enough to Support a Chapter 13 Repayment Plan

Determining whether you have enough income to support a Chapter 13 repayment plan involves a thorough assessment of your financial situation. The court will examine your current monthly income, which includes wages, salary, and other sources of income. They will also consider your monthly living expenses, such as housing, utilities, and food. Ensuring you have sufficient disposable income to make the required payments is crucial for the success of the plan.

Repaying Creditors in a Chapter 13 Plan

The amount that creditors must repay in a Chapter 13 plan varies based on several factors, including the total amount of debt, the debtor’s disposable income, and the type of debt. Priority debts must be paid in full, while secured debts require payments to keep the collateral. Unsecured creditors typically receive a portion of the remaining disposable income after priority and secured debts are addressed.

Cost to File Chapter 13

Filing for Chapter 13 bankruptcy involves several costs, including filing fees, administrative fees, and attorney fees. According to the US Bankruptcy Court for the Middle District of Georgia, the filing fee for a Chapter 13 bankruptcy is $310, but this amount can change. Additionally, debtors may incur costs for credit counseling and financial management courses, which are required components of the bankruptcy process.

Bankruptcy Exemptions in Georgia

Bankruptcy exemptions in Georgia play a crucial role in determining what assets you can keep when filing for Chapter 13 bankruptcy. These exemptions allow you to protect certain property from being used to pay off your creditors. Common exemptions include a homestead exemption, which protects equity in your primary residence up to a certain amount, and exemptions for personal property such as vehicles, household goods, and retirement accounts.

Properly applying exemptions is essential for two reasons.

1. Use of exemptions helps ensure that you can retain essential assets, such as your home and car, which are vital for maintaining stability during and after the bankruptcy process.
2. Classifying assets as exempt allows you to create a realistic and manageable repayment plan. This knowledge prevents surprises during the bankruptcy proceedings and helps you to make informed decisions about your financial future.

What is the Chapter 13 Hardship Discharge?

A hardship discharge may be granted to Chapter 13 debtors who are unable to complete their repayment plan due to circumstances beyond their control, such as illness or job loss. To qualify, the debtor must demonstrate that their inability to continue making payments is due to reasons not within their control and that modification of the plan is not possible. A hardship discharge relieves the debtor of certain remaining debts.

Tips to Make Your Chapter 13 Plan Work

Making a Chapter 13 plan work involves staying organized and proactive. Key tips include:

• Setting up automatic payments
• Tracking your expenses
• Maintaining open communication with your bankruptcy trustee and creditors
• Creating an emergency fund that can help you manage unexpected expenses without jeopardizing your repayment plan

Bouncing Back from a Chapter 13 Bankruptcy

Rebuilding your financial life after completing a Chapter 13 bankruptcy requires careful planning and discipline. Steps to boost credit after bankruptcy include monitoring your credit report, creating a realistic budget, and gradually reestablishing credit through secured credit cards or small loans. Consistent financial management can help improve your credit score and ensure long-term financial stability.

Common Challenges in Chapter 13 Cases

Chapter 13 bankruptcy cases can face several challenges, including missed payments, changes in income, and legal issues. Missed payments can lead to the dismissal of your case, while significant changes in income may require modifications to your repayment plan. Staying informed and seeking legal advice when needed can help you navigate these challenges effectively.

Role of a Bankruptcy Attorney in Chapter 13 Cases

Your bankruptcy lawyer plays a crucial role by advising you throughout the Chapter 13 process, starting with helping you understand your options. An attorney will also prepare and file necessary documents, protect your assets through exemptions, and represent you in court. Choosing a qualified attorney with experience in Georgia bankruptcy law can ensure that your case is handled efficiently and effectively.

Comparing Chapter 13 and Chapter 7 Bankruptcy

When considering bankruptcy options, understanding the differences between Chapter 13 and Chapter 7 bankruptcy is crucial. Both types offer debt relief, but they have distinct processes and implications. This section will compare Chapter 13 and Chapter 7 bankruptcy, helping you make an informed decision based on your financial situation in Georgia.

Overview of Chapter 7 Bankruptcy

Chapter 7 is often referred to as “liquidation bankruptcy,” because the bankruptcy trustee has the power to sell non-exempt assets to pay off unsecured creditors. This process typically takes a few months, providing a quick discharge of qualifying debts.

However, not everyone qualifies for Chapter 7. Eligibility is determined by the means test, which compares your income to the median income in Georgia. If your income is too high, you may not qualify. Chapter 7 is ideal for those with low income and few assets, as it allows for a fresh start but may result in losing non-exempt property.

Chapter 13 Bankruptcy Basics

In contrast, Chapter 13, known as a “wage earner’s plan,” allows debtors to keep their property and repay debts over a three to five-year period. This type of bankruptcy is suitable for individuals with regular income who can afford to make monthly payments.

The repayment plan is calculated based on your disposable income, which is determined by subtracting allowable expenses from your current monthly income. Unlike Chapter 7, Chapter 13 provides a way to catch up on missed mortgage payments and prevent foreclosure, making it a valuable option for homeowners in Georgia.

Chapter 7 v. Chapter 13: Critical Differences Recap

1. Eligibility: Chapter 7 requires passing a means test, while Chapter 13 requires a regular income to support the repayment plan.
2. Process Duration: Chapter 7 is quicker, typically lasting a few months, whereas Chapter 13 spans three to five years.
3. Asset Retention: Chapter 7 may result in losing non-exempt assets, whereas Chapter 13 allows you to keep your property while repaying debts.
4. Debt Types: Chapter 7 primarily discharges unsecured debts, while Chapter 13 can include secured debts like mortgage arrears and car loans in the repayment plan.

Takeaways on Chapter 13 Plans

Filing for Chapter 13 bankruptcy in Georgia is a complex process that requires careful consideration and planning. By understanding how the payment plan is calculated and the various factors involved, you can make informed decisions and work towards achieving financial stability. If you are considering Chapter 13, consult with a qualified bankruptcy attorney to explore your options and develop a plan that meets your needs.

Call Now to Speak to a Georgia Chapter 13 Lawyer

Are you struggling with debt and considering filing for Chapter 13 bankruptcy in Georgia? Don’t face this complex process alone. Morgan & Morgan Attorneys at Law P.C. can guide you every step of the way, ensuring you understand your options and rights. Contact us today to schedule a free consultation and start your journey toward financial stability. Reach out to us now or call us at (706) 350-6156 to get expert advice from experienced bankruptcy attorneys.

Frequently Asked Questions (FAQ) about Chapter 13 in Georgia

What is the role of the bankruptcy trustee?

The bankruptcy trustee plays a crucial role in a Chapter 13 case. Their primary responsibilities include reviewing the debtor’s repayment plan, collecting monthly payments from the debtor, and distributing those funds to creditors. The trustee also ensures that the debtor complies with all bankruptcy laws and procedures.

Additionally, they may conduct a meeting of creditors, where they ask questions about the debtor’s financial situation and the proposed plan.

Can I keep my house in a Chapter 13 bankruptcy?

Yes, one of the key advantages of Chapter 13 bankruptcy is that it allows you to keep your house, even if you are behind on a mortgage payment. You might even qualify to retain your home if you’ve missed multiple mortgage payments and incurred arrearages. The repayment plan can include past-due amounts, allowing you to catch up on missed payments over time.

As long as you continue making the current mortgage payments and comply with the terms of your repayment plan, you can avoid foreclosure and keep your home.

How does a Chapter 13 bankruptcy affect my credit score?

Filing for Chapter 13 bankruptcy will have a negative impact on your credit score, as it will be reported on your credit report for seven years from the filing date. However, it may be less damaging than a Chapter 7 bankruptcy. Successfully completing your repayment plan can help you rebuild your credit over time. Additionally, managing your finances responsibly during and after the bankruptcy process can further improve your credit score.

What happens if I miss a payment in my Chapter 13 plan?

Missing a payment in your Chapter 13 plan can jeopardize your bankruptcy case. The trustee may file a motion to dismiss your case, which could lead to losing the bankruptcy protections and facing creditor actions again.

However, if you miss a payment due to a legitimate reason, you can request a modification of your repayment plan or ask the court for a temporary suspension of payments. It’s important to communicate with your attorney and the trustee promptly if you encounter payment difficulties.

Can I file for Chapter 13 if I am self-employed?

Yes, self-employed individuals can file for Chapter 13 bankruptcy. However, you must provide detailed and accurate financial records, including income and expenses, to demonstrate your ability to make regular payments under the repayment plan. The court will closely examine your business income and personal finances to ensure that you can sustain the proposed payment plan. Working with a knowledgeable bankruptcy attorney can help ensure that your filing is thorough and meets all legal requirements.

How long does a Chapter 13 bankruptcy case last in Georgia?

A Chapter 13 bankruptcy case typically lasts between three to five years. The duration depends on the debtor’s income relative to the state median income. If the debtor’s income is below the state median, the plan is generally three years unless extended by the court. If the debtor’s income is above the median, the plan must last five years.

What determines the length of a Chapter 13 plan?

The length of a Chapter 13 plan is primarily determined by the debtor’s current monthly income compared to the median income for a household of the same size in Georgia. In general, debtors with income below the median typically have three-year plans, while those with income above the median have five-year plans. Additionally, the amount of debt and the specific terms set by the court can influence the plan’s length.

How do you calculate disposable income in Chapter 13?

Disposable income in Chapter 13 is calculated by starting with the debtor’s current monthly income, which includes all sources of income over the six months prior to filing. Then, you subtract allowable expenses.

Allowable expenses are based on IRS standards and local cost-of-living expenses, covering necessities like housing, utilities, food, transportation, and medical costs. The remaining amount is considered disposable income and is used to determine the monthly payment to creditors.

How do I lower my Chapter 13 payment?

To lower your Chapter 13 payment, you can explore several options. First, review your allowable expenses to ensure they are accurately reported and maximized. You might also consider modifying your repayment plan if there is a significant change in your financial situation, such as a decrease in income or an increase in necessary expenses.

Consulting with your bankruptcy attorney can help you identify potential adjustments and file the necessary motions with the court.

What percentage of debt do you have to pay back in Chapter 13?

The percentage of debt that must be paid back in a Chapter 13 plan varies based on the debtor’s disposable income, the total amount of debt, and the type of debt. Priority debts must be paid in full, while secured debts typically require payments to retain the collateral. Unsecured debts, such as credit card debts and medical bills, may receive a portion of the disposable income after priority and secured debts are addressed. In some cases, unsecured creditors may receive only a small percentage of the original debt, depending on the debtor’s financial situation.

Secure Your Financial Future Now

If you’re overwhelmed by debt and need a clear, actionable plan to regain control of your finances, Morgan & Morgan Attorneys at Law P.C. is here to help. Our skilled attorneys specialize in Chapter 13 bankruptcy and can tailor a repayment plan that fits your unique situation. Don’t wait – take the first step towards a brighter financial future by contacting us today or calling (706) 350-6156. Let us help you achieve the fresh start you deserve.

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