If you choose to file Chapter 13 bankruptcy, you will be placed on a repayment plan. This plan will last anywhere from three to five years, and it is designed to help you repay some or all of your debts so you can have a fresh start when the plan is over. The big questions you may have are probably how long your plan will be and how much you will have to pay. The answer to this is something your attorney will calculate, and it will be based on the following factors.
Your income compared to the state median income
Whether your plan is 36 months or 60 months typically depends on how your income compares to the median income in your state. If your income is below this amount, you will probably be able to get by with a 36 month plan. If it is higher, you may be required to have a 60 month plan. A repayment plan can also fall in between these two time frames in some cases.
Your disposable income
The plan is also determined based on your disposable income. When you file for Chapter 13, your attorney will need to know exactly how much your regular bills are each month. This includes your mortgage, utilities, and any other regular bill you have. It also includes money you spend on groceries, entertainment and clothing.
When the lawyer finds this amount, he or she will subtract it from your income to determine your disposable income. The amount of disposable income is used to determine how much your payments will be for your bankruptcy. When this amount is calculated and approved, you will have to pay it each week or month (depending on how it is set up) until the bankruptcy case is through, which could be anywhere from 36 to 60 months.
The terms of the bankruptcy
The final factor that you should realize is the terms of the bankruptcy will determine how much you repay in all. There are times when people end up repaying 100% of what they owe, but there are other times when they will only repay a small percentage of what they owe.
If the trustee accepts your lawyer's proposal, you will not owe any of your debts when the bankruptcy is over. This does not matter if you had only repaid 50% of your total debts, and it does not matter if the case lasted three years or five. The total amount you will repay is the amount of your monthly payments times the number of months your plan is for.
Bankruptcy can be a complicated process, which is why you should hire a bankruptcy attorney for help. An attorney can help you decide which branch to file and will help you work out a plan that will get you out of debt in five years or less.