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Calculating Your Chapter 13 Bankruptcy Payment

As a member of the bankruptcy team at Grady BK, PLLC, I understand the financial hardships many New Yorkers face today. The rising cost of living, unexpected medical expenses, job losses, and mounting credit card debts can create a crushing burden with no clear solution.

Fortunately, Chapter 13 bankruptcy offers people overwhelmed by financial difficulties a way to manage debt and keep their personal or necessary assets. In this article, I’ll explain how Chapter 13 bankruptcy works and how it benefits people with overwhelming debt. We’ll also look at how repayment plans are calculated so your monthly payments are manageable and don’t cause you additional hardship.

If you need experienced bankruptcy advice tailored to your specific financial goals, call Grady BK, PLLC today.

The Benefits of Chapter 13 Bankruptcy

Chapter 13 bankruptcy is referred to as reorganization bankruptcy because it allows you to repay your debts over three to five years based on a court-approved plan. One of the most immediate benefits it offers is the ability to keep your home, car, and other important assets while catching up on overdue payments. The plan focuses on your comfort and stability because the court understands you can’t repay your debts without the assets you need to thrive. It’s a way to lower your monthly obligations while you recover financially from the hardships you’ve faced.

Another significant benefit is the protection Chapter 13 provides from foreclosure and repossession. As soon as you file for Chapter 13 in New York, an “automatic stay” is put into place that stops all your creditors from pursuing any collection actions. This includes harassing phone calls, threatening letters, attempts at repossession, and beginning or continuing the foreclosure process. The automatic stay gives you immediate relief and the breathing room you need to reorganize your finances on your terms. It politely yet firmly explains to your creditors that you are in the process of reorganizing your finances, and they will be notified of your decisions when you’re ready.

Who Can Benefit from Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is designed for people who have a steady income, but a significant portion of that income is spent on repaying their debts. In New York, if more than 30% of your monthly income goes toward debt payments, Chapter 13 can be an effective way to regain control of your finances.

It’s an excellent option for people behind on their mortgage or car payments who want to catch up on what they owe without losing the home or car they need to get by. It offers peace of mind for people who wish to protect the co-signers on their loans by preventing creditors from pursuing them for repayment. And it’s ideal for higher-income individuals who exceed the income limits set for Chapter 7.

How Are Chapter 13 Bankruptcy Payments Calculated?

Calculating Chapter 13 bankruptcy payments involves several factors, including your income, expenses, and what types of debts you have. Your monthly income forms the basis for your repayment plan by considering your wages, salaries, business profits, rental properties, and any other regular sources of income. The court will look at your income over the past six months to determine an average it can use in the calculation.

Your necessary living expenses are deducted from your income to calculate how much disposable income you have every month. Expenses include housing, utilities, food, transportation, medical expenses, and any other essential costs that help you make a living. The bankruptcy court uses the IRS standards for what qualifies as living expenses to ensure they’re reasonable and necessary.

The types of debts you have also affect your Chapter 13 repayment plan. Debts are categorized into three groups: priority debts, secured debts, and unsecured debts.

Priority debts are things like taxes, child support, and alimony, which must be paid in full by the end of the plan. Secured debts are debts backed by collateral, like mortgages or car loans. The plan will cover any missed payments on these debts and allow you to keep up with current ones. Unsecured debts include credit card debt, medical bills, and personal loans. These debts are only paid after priority and secured debts are paid, and are usually negotiated down to a fraction of the original amount.

How to Successfully Complete a Chapter 13 Bankruptcy in New York

Filing for Chapter 13 bankruptcy in New York is a structured process that starts with a session of mandatory credit counseling. This is designed to help you determine if bankruptcy is the best option for your situation. Once the counseling session is complete, we’ll file a petition with your local bankruptcy court that includes all your financial information and a proposed repayment plan that benefits you most.

A month later, you’ll attend a meeting of your creditors, where the bankruptcy trustee and the organizations you owe money to will get to ask questions about your income, expenses, and the repayment plan we’re proposing. This can seem intimidating, but being prepared makes a big difference. We let you know ahead of time what you can expect and coach you on the questions they’ll be likely to ask.

Once your repayment plan is approved, you’ll begin making payments to the bankruptcy trustee, who distributes the funds to your creditors. Successfully completing your repayment plan leads to the discharge (wipe away) of your remaining unsecured debts and a brighter financial future going forward.

How Does a Bankruptcy Attorney Help with Your Chapter 13 Repayment Plan?

Repaying your debts with a Chapter 13 bankruptcy involves careful planning and experienced support. At Grady BK, PLLC, our job is to review your finances and develop a repayment plan tailored to your needs. We’ll also negotiate with your creditors to lower your interest rates and challenge any unfair claims that might reduce the overall debt you owe. We’ll handle all the paperwork, represent you in hearings, and provide continuous support for any changes or challenges that come up along the way.

Call us today at (315) 299-9005. With our guidance and your commitment, you can take the first step toward a more secure and stable financial future.