Above, I said "In Chapter 13, you simply pay as much as you can afford for 3 to 5 years in your Chapter 13 Plan, and at the end of the 3 to 5 year Plan, whatever debt is unpaid is discharged and wiped out. So, you pay 5% or 85% in Chapter 13, depending on what you can afford."
What I meant is that you may pay 5%, you may pay 50%, you may pay 100%, etc., it doesn't really matter as long as you pay as much as you could afford. Whatever you cannot afford gets discharged.
Here's a really simplistic example: Say you look at your net monthly income and your net monthly reasonable and necessary expenses, and you determine you can afford to pay $300/mo to the court into your Chapter 13 Plan. Say you decide to go 5 years (60 months). $300 times 60 months equals $18,000.00. Of this $18,000, 7% or so will go to the Chapter 13 Trustee
to whom you make payments as their statutory fee (this percentage varies but we'll use 7% for our example). This 7% fee drops the $18,000 down to $16,740. Say you are behind on your mortgage by $3,000, this will be paid through the Plan to catch up the mortgage, dropping the balance to $13,740. Say you are paying your attorney $2,000 through the Plan, this will drop the balance to $11,740. So, your unsecured creditors will get $11,740, and this may be 5% if you owe $234,800 in unsecured debt, or it may be 90% if you owe $13,044 in unsecured debt, it doesn't really matter. Unsecured debt means credit cards, personal loans, medical bills, etc.
Another thing to consider is that you may or may not qualify to file Chapter 7 depending on how much money you make based on the Means Test
, go here to see how much you can make in your State based on your household size and gross income:
Note that these amounts get updated 3/17/09 I believe.
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