Your monthly payments in a chapter 13 are based on numerous criteria. A debtor must pay all of their monthly household disposable income through a chapter 13 plan or trustee payment, under virtually all circumstances. Certain debt, such as priority (certain taxes) and secured debt (mortgage arrears) must be paid through the monthly plan, in virtually all circumstances. If the debtor does not have sufficient monthly disposable income to make the required payment to creditors that must be paid, the case will be dismissed or thrown out. In other words, in a particular case, if the debtor does not have the sufficient disposable income to pay to the trustee each month, for such creditors, the case will be dismissed.
At the commencement of the case, the trustee confirms that the debtor has sufficient disposable income to make the required monthly payments. At the Confirmation Hearing, the amount of the monthly payment will be confirmed, and possibly modified, at an amount that pays all disposable income to pay all creditors who are required payment under the bankruptcy code. If the debtor earns more than the amount needed to pay certain creditors who are required payment under the code, the debtor must pay all of their disposable income, with the balance of the monthly disposable income to be paid towards the unsecured debt (ie. credit card debt), pro rata.
After the Confirmation Hearing, the debtor must continue to make the monthly trustee payments until the case is completed. However, if the debtor has an increase in disposable income, the debtor is required to pay the additional disposable income to the trustee. If the debtor’s income is reduced, the debtor may not be able to reduce their monthly payment, in the event that the disposable income is insufficient to pay the creditors who are required payment under the plan. However, the monthly trustee payment may be reduced by the amount that was being paid to the unsecured creditors, solely due to having excessive disposable income.
Chapter 13 bankruptcy attorney Robert Manchel may be contacted at 1 (866) 503-5655 for a free consultation.