How much will my plan payment be in chapter 13?

This frequently comes up when discussing a possible chapter 13 case filing with a client. The answer depends on what kind of debt we’re discussing. Let’s start with unsecured debt, like credit cards, medical and (some) lawyer bills, the butcher, the baker, etc. (Not included here are priority claims, discussed below.)

Some people guess that the payment amount will depend on the total amount of their (unsecured) debt, i.e., if you owe $50,000 in unsecured debt, you might think that you’ll have to pay more than if you owed $15,000 on your credit cards. But, it actually doesn’t work that way.

In the Southern District of New York (which includes the divisions of Poughkeepsie and White Plains), the plan payments do not vary based on the total amount of your unsecured debt. The less you owe, the more that unsecured creditors like credit card companies receive on their claims. The more you owe, the less they receive. That’s because they (the unsecured creditors) share on a percentage basis what is paid into the plan, after payment of claims that have a higher priority (e.g., the trustee’s fee, your legal fees under the plan, taxes, and secured claims like back mortgage and car payments).

Unsecured debt like credit card debt is at the bottom of the bankruptcy priority system, the bankruptcy food chain, if you will. Child support and maintenance (known elsewhere as alimony) are at the top of the priority list, followed by administrative expenses (e.g., the chapter 13 trustee’s fee and any fees under the plan to your bankruptcy lawyer), certain taxes, etc. There are more priority claim types than this, but these are the most common.

The take away is that child support and maintenance arrears as of the filing of the case must be paid in full over the life of the plan, ditto with administrative expenses and some taxes. So, your plan payment calculation requires figuring how much is needed to cover these items.

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