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Calculating a payment plan for a Chapter 13 bankruptcy

California residents who have declared Chapter 13 bankruptcy might wonder how their payments will be calculated. There are a few kinds of bankruptcy a person might file for, but the most common types are Chapter 7 or 13. With Chapter 7, many eligible debts can be discharged.

Chapter 13 allows a person to keep some property, such as a home, and pay off debts over a period of three or five years. The payment is made to a trustee who then distributes the payments to creditors. Filing for Chapter 13 requires a person to have a reliable income source, but it does not necessarily have to be the same amount every month, and it does not have to come from employment income. It may be from alimony, a pension or other sources. Based on income and expenses, the person might not pay the same amount every month. The amount paid could change regularly.

The debtor has to provide both proof of income for six months and a list of monthly expenses. How these are calculated varies. For example, a person's actual rent or mortgage is taken into account, but there is a government-set amount for utilities. In a Chapter 13 plan, certain debts, such as alimony and back income taxes, must be paid in full. People must also catch up on house payments to keep their home.

An attorney might explain the process and what type of bankruptcy a person may be eligible for. There can be a number of advantages in filing for bankruptcy. Doing so immediately puts a stop to all creditor actions, so if the person is facing foreclosure or lawsuits or dealing with creditor harassment, that action will stop while the bankruptcy is resolved. Bankruptcy then can allow the person to get a fresh start.

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