When you and your Kennesaw bankruptcy attorney have determined that Chapter 13 would be more beneficial or you have failed the Chapter 7 means test, you will have to create a repayment plan that is approved by the bankruptcy court. In order to do that, the courts use what is called “median income” for the state of Georgia. This information is typically compiled by using data from the U.S. Census Bureau and then compiled by the courts.
The U.S. Bankruptcy Courts have established the median income for Chapter 13 filings after November of 2014 for a single personal family at $$40,985. This would be the number that would be applied to your Chapter 13 bankruptcy for determining your payments under your plan.
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Once the median income is determined, the calculations to determine your monthly payments on your bankruptcy plan are then made by deducting reasonable expenses that are necessary for your maintenance and support. The remaining balance is what is known as disposable income and this is the amount that is applied to your payment plan.
What types of expenses may I claim?
Debtors will have to fill out Official Form 22C-2 and may deduct some of the following expenses to calculate their disposable income:
- Typical home payments – this would include payments for utilities, rent or mortgage payments and telephone expenses.
- Personal care – including items like food, clothing, medical bills including insurance, prescriptions medications, etc.
- Transportation – the cost of maintaining a car including fuel, insurance and auto payments.
- Other – taxes, care for children or elderly parents, child and spousal support payments may be deducted from your income. In addition, you may be able to deduct certain job-related expenses and charitable contributions of up to 15 percent of your income.
- Trustee – the trustee fees that will be required which can be as much as 10 percent of your overall plan.
It is important to understand that the courts will use what is called a “reasonableness” measure for expenses like rent and utilities. These will be based on local or national standards which are issued by the Internal Revenue Service. Your Kennesaw bankruptcy attorney can explain this to you further.
Another factor that the bankruptcy court will look at is called the best interests of the creditor. This is primarily to ensure creditors will “receive as much has they would have had the filer been using Chapter 7. Keep in mind, that in many cases, under Chapter 7, after all exemptions are applied most creditors (except secured creditors) would receive nothing so typically, this will not be a factor for most who file bankruptcy.
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Once the bankruptcy court has received all of the proper forms for Chapter 13 from your Kennesaw bankruptcy lawyer, they will either approve the repayment plan or not. In most cases, the typical Chapter 13 plan will be for a period of three years though if your disposable income demands a longer term, the court may approve the plan for as many as five years.
For many debtors, Chapter 7 bankruptcy will be a far more effective method of dealing with debts. However, for those debtors who have too much income to pass the Chapter 7 means test or for those who have arrears that pertain to their mortgage, Chapter 13 may be their best option. When you are considering bankruptcy as an option for getting out from under overwhelming debt, contact Roger Ghai, a bankruptcy attorney in Kennesaw at the Law Offices of Roger Ghai at (770) 792-1000.