Depending on the budget, you might have to pay back 100% to your unsecured creditors in a chapter 13 bankruptcy case. The trustee appointed for your case is going to interview you at a 341 meeting of creditors. One of the main purposes of this meeting is to determine whether or not you are putting all of your disposable income towards your repayment plan. If the amount of your disposable income is enough to pay off your creditors in full within 36 or 60 months, then you are likely going to have to pay back 100% to your unsecured creditors.
Disposable income is determined by IRS standards as well as local standards as to how much you can allocate for housing, transportation, food, and other expenses. If you are going to pay back 100%, you may have the ability to inflate your budget so that you’re not paying back 100% rapidly. By this I mean, the trustees are reasonable in terms of elevated expenses provided you are paying back 100%. It is in the 10% plan or anywhere less than one hundred percent, where the trustee is going to scrutinize your budget in much greater detail.
The goal of course in chapter 13 is to reorganize debt. If the debt must be reorganized at 100%, then you are going to be able to have the budget to make that happen. If you do not have the budget to make that happen, then you are likely going to have to pay back less than 100%. When dealing with a mathematical formula and when you’re dealing with IRS guidelines, there is some flexibility in terms of how much you can have per monthly expenses. I would recommend that you sit down with an experienced chapter 13 bankruptcy attorney to see whether or not you would qualify for a 10% plan or a 100% plan.
The most difficult part of chapter 13 is getting a plan confirmed. In order to get that plan confirmed, you’re going to have to convince the trustee and the court that you are putting all of your monthly disposable income towards the repayment of your creditors. If you’re unable to do so, the case will not get confirmed and the trustee will bring a motion to dismiss your case because of the denial of confirmation. Thus, timing is critical at the start of your case in that you make all of your payments on time and that you provide all the documentation requested by the trustee. Provided you can do so, you have a much greater likelihood of getting your case confirmed. If your case winds up getting dismissed for failure to confirm, you will likely have a second opportunity to re-file a case in an effort to get your second case confirmed.
