Why is my Chapter 13 bankruptcy payment so high?

When many people approach a Sacramento Chapter 13 Bankruptcy Lawyer, one of their most recurring concerns is the perceived high cost of their Chapter 13 bankruptcy repayment plan. If you’ve ever found yourself asking, “Why is my Chapter 13 bankruptcy payment so high,” you’re not alone. The complexities of bankruptcy law are often daunting, but Liviakis Law Firm is here to help shed light on the matter.

Understanding Chapter 13 Bankruptcy

Chapter 13 bankruptcy, often referred to as the wage earner’s plan, is a legal framework that enables individuals with regular income to develop a plan to repay all or parts of their debts over three to five years. Borrowers propose a repayment plan based on their income, living expenses, and debt amounts. The court oversees this plan to ensure fair treatment to all involved parties.

Factors Determining Chapter 13 Bankruptcy Payments

Several interlinked factors set the amount of your Chapter 13 bankruptcy payment. These include:

• Disposable Income: Your disposable income, calculated as your total income minus allowed bankruptcy expenses, significantly influences your repayment. The sum of your allowed monthly expenses and disposable income should cover the total amount of your repayment plan.
• Type and Amount of Debt: Different types of debt are treated differently in Chapter 13, with secured debt (like a mortgage or car loan) and priority unsecured debt (such as alimony or unpaid taxes) owed in full. The remaining amount is to be used to pay off nonpriority unsecured debts.
• Property Value: If you have nonexempt property or assets not covered by an equity, you have to pay an equivalent amount toward your debts.

Why Your Chapter 13 Bankruptcy Payment May Seem High

Given these factors, the expense of your Chapter 13 bankruptcy repayment plan may seem high for several reasons. It could be that your income level is high, leading to a larger sum being considered disposable. Or you have substantial amounts of secured and priority unsecured debts that need to be settled in full. You may also have assets that are not covered by exemptions, which can further contribute to high payments.

Communicate with Your Sacramento Chapter 13 Bankruptcy Lawyer

If you feel strapped by your bankruptcy payments, it can be beneficial to speak with a professional Sacramento Chapter 13 Bankruptcy attorney. A bankruptcy attorney can help devise strategies to manage your payments effectively, determine possible changes to your plan, or explore alternatives if your financial circumstances change.