How to Determine What Unsecured Creditors Will Be Paid in Chapter 13
Calculating a Chapter 13 plan is complicated. Attorneys usually draft their plans with software that calculates the plan for them. Still, the dividend to general unsecured creditors is fairly simple to determine. Your plan must pay general unsecured creditors at least what they would have received if you had filed Chapter 7. In many cases, these creditors only receive a percentage of their outstanding balances; you discharge the rest. The percentage depends on your disposable income, the value of your assets and your bankruptcy exemptions.
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Instructions
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Value your assets. You can value your house by looking at the listings in your neighborhood and considering the market and the condition of your home. If you can afford it, obtain an appraisal; otherwise, market conditions in your neighborhood are a good indication. You can value a vehicle with a vehicle appraisal guide, such as the Kelley Blue Book or the NADA guide. If you have collectibles, weapons or commercial equipment, try to get them appraised. Your attorney can help you value your household goods. If any of your property is subject to a lien, such as a home mortgage or a car lien, the lien reduces the value of the property and reduces the amount you must exempt. For example, if your house is worth $100,000 but you have a $95,000 mortgage, your house is only worth $5,000 to the bankruptcy estate.
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Claim your exemptions. Section 522 of the Bankruptcy Code lists the types of property you can exempt and the value amounts. You can also choose to use your state's law to exempt property. Some states require that you only use the state exemptions. Apply the appropriate exemptions to each item of your property. After you apply your exemptions, you may or may not have property that is not covered by exemptions and is therefore nonexempt.
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Determine the total amount of general unsecured debt. Credit cards, medical bills, student loans, personal loans and utilities are general unsecured debts. Although student loans are nondischargeable, the Bankruptcy Code still lumps them together with these other unsecured debts. Do not include priority unsecured debts such as child support, alimony or income taxes. Add together the balances due on each general unsecured debt as of the date you filed the bankruptcy.
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Determine the value of the bankruptcy estate by calculating the total nonexempt value of your assets. For example, if your assets' total value is $125,000 and there are $95,000 in liens on the property, the equity in the assets is $30,000. If your exemptions total $17,000, you then have $13,000 of nonexempt assets.
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Calculate the percentage your Chapter 13 plan must provide to general unsecured creditors. If you have $13,000 in nonexempt assets and $45,000 in general unsecured debt, your Chapter 13 plan must provide at least 29 percent to each general unsecured creditor, because $13,000 is 29 percent of $45,000. If your general unsecured creditors are a $10,000 credit card, a $15,000 medical bill, a $5,000 electricity bill and a $15,000 personal loan, each creditor will receive 29 percent of those balances. For example, the $10,000 credit card creditor will receive $2,900.
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Tips & Warnings
Try not to undervalue your property, but especially try not to overvalue your property. Many debtors think their homes and cars are worth more than they actually are worth, and if you list your property at a higher value, you pay more. Follow your attorney's advice and be realistic.
Value your property honestly and list everything you own. Purposefully falsifying information in or excluding information from your bankruptcy paperwork is a crime.
