In a Chapter 13 bankruptcy, the payment plan is primarily determined by the individual's income, allowable expenses, and the debts owed. The individual filing for bankruptcy submits a proposed repayment plan to the bankruptcy court, which outlines how they intend to pay their creditors over a three to five-year period. The court must approve this plan, and the repayment amounts will vary based on several key factors.
First, the individual's disposable income is assessed. This disposable income is calculated by taking the total monthly income and deducting reasonable and necessary living expenses. These expenses may include basic necessities such as housing, utilities, food, transportation, and insurance. In addition to these expenses, the court will also consider any secured debts, such as car loans or mortgages, that the individual must continue to pay during the repayment period.
Second, the nature of the debts influences the repayment plan. If the individual has priority debts, such as certain taxes or child support, these debts must typically be paid in full within the plan. Unsecured debts, like credit card debt, may have lower repayment rates and could be paid based on the individual's capacity to make payments.
Finally, it is essential for the individual to work with their attorney or a bankruptcy advocate to develop an accurate and realistic plan that meets the legal requirements of the bankruptcy process. The Chapter 13 Office of North Carolina can provide useful information, and one may refer to their website for specific guidelines on the repayment plan process.