Bad financial decisions can cause a change of fate. This can happen to anyone, anytime. Filing for bankruptcy offers a way to salvage not just your property but also allows you to get a fresh start. Bankruptcy can be filed by an individual or company under various chapters. Chapter 13 or wage earner’s bankruptcy is for people with a steady source of income. Like other chapters, exemptions are available under chapter 13 reimbursement proposal. They are also helpful in calculating the amount that the debtor will pay. Under chapter 13 bankruptcy, one can keep all their property, but they are required to pay their creditors the value of all things not covered under exemption within a 3-5 years frame.
Use Exemptions to Protect Property in Chapter 13 Bankruptcy
Household goods, retirement account, car as well as some equity in house are some of the bankruptcy exemptions that one can avail when they file for chapter 13 bankruptcy. However, luxury items like vacation homes, jet planes, cruise boats etc. are not covered under exemption. Both chapter 7 & 13 allow exemptions to protect the debtor’s property while ensuring that the creditors get paid their due amount. However, the functioning of both the chapters is different. Despite the difference in approach, creditors get the worth of non-exempt property in both cases.
The basic difference between filing for bankruptcy under chapter 7 & 13 is that you can keep your non-exempted property too under the latter case. However, your monthly repayment to creditors through the chapter 13 repayment plan will shoot through the roof. In case your monthly wages do not support it, you won’t be able to file for bankruptcy under chapter 13.
Chapter 13 Repayment Payment Plan Calculation
Bankruptcy filed under chapter 13 involves monthly payment to bankruptcy trustee for partial or complete repayment of your debts. Despite the presence of a number of complicated rules, the repayment amount depends on:
- Your income
- Your monthly expenses
- Any property you own, and
- The extent and nature of your debt
To calculate your loan repayment, you need to follow the following steps –
- Calculation of disposable income can be a bit tough. You need to deduct all necessary expenses from your monthly income to find out the amount you can spare. This amount will be used to repay the loans every month, for the number of months mentioned in your repayment plan.
- Find out the worth of the non-exempted assets.
With these two figures at hand, you will be paying your creditors the greater of the two i.e. disposable income or value of non-exempt property, to clear the dues.
Role of Non-Exempted Property in Chapter 13 Repayment Plan Payment?
The repayment plan involves to clear your dues within 3-5 years using either your disposable income or your non-exempted property. In case, you are one of those people who doesn’t own much non-exempted property, you can come up with a plan that has better chances of approval from the judge presiding over the chapter 13 confirmation hearing. In case, it is the other way round, i.e. you have significant amount of non-exempt property, but not much of monthly income, you will have a difficulty in meeting the good faith necessities. In this case, you might need the help of law firms like Recovery Law Group in Los Angeles, which specifically deal with bankruptcy issues.
Bankruptcy exemptions allow people a fresh start while permitting them to keep property essential to keep a home and job. Exemptions also assist to determine the amount a debtor must repay under chapter 13 repayment plan. Though people who file for chapter 13 bankruptcy are allowed to keep all property, there are strings attached. They must pay the creditors, value of any non-exempt property (things which aren’t covered under any exemption) within a 3-5 years repayment plan.