Income Requirements and Proposed Payment Plan

For a Chapter 13 bankruptcy, you will need a stable income with disposable income (income left over after you pay the bare necessities of life such as shelter, food and utilities). This is why it is often referred to as “wage earners” bankruptcy; you must have wages (income) to keep the plan viable. You must have no more than $1,081,400 in secured debt (debt involving property that your creditor might take if you do not make your payments) and $360,475 in unsecured debt.

The filing of the Chapter 13 petition must be accompanied by a proposed payment plan extending over three to five years. The proposed payment plan must provide for the payment of all “priority claims,” such as taxes, in full.
The bankruptcy trustee appointed by the Bankruptcy Court must review the proposed plan for accuracy and flexibility. The proposed plan is distributed to creditors, who have the right to object to the plan if it is unreasonable. If the plan is approved, you can keep all your assets during the period of the plan. You make monthly payments to the bankruptcy trustee, who distributes the funds to the creditors according to the plan. If the plan is completed as approved, your unpaid debts are “discharged.” If you do not complete the repayment plan as approved, you will have several other alternatives which I can explain to you.

The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. 1328(a).

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