What determines the payment percentage you make in a Chapter 13, someone with $100,000 worth of unsecured debt, there are two tests that one looks at to determine the amount of the payment.

One is called the Liquidation Test which is what would you have lost had you filed Chapter 7. So again using that example of the Mercedes. It’s $10,000 over your exemptions. They would say you have to pay at least $10,000 towards your unsecured creditors.

So in that example, you’re paying 10 percent. By paying that 10 percent over 36 to 60 months, you wipe out the entire $100,000 debt. The other test that the trustee in these cases looks at is something called the Net Disposable Income Test which in essence says that you take your gross monthly income. You back out your taxes. You back out your reasonable monthly expenses and there are some IRS standards that help a trustee to determine what the appropriate amount of those expenses are. You will arrive at your net disposable income.

So using the example where you might have $400 left over after you pay your reasonable monthly expenses, the trustee would require you to pay out $400 a month towards your unsecured creditors. Again using the simple math over 60 months, that might amount to 28,000 on 100,000. By paying that, you wipe out the entire debt amount.

Again my name is Richard Ellis. We’re located at 2187 Ringling Boulevard in Sarasota. We’re down the street from the Sarasota Courthouse.

I also have an office on Manatee Avenue in Bradenton. It’s 1909 Manatee Avenue. Please give us a call at 941-351-9111. Our website is also www.SarasotaBankruptcy.com. We would be glad to help if we can.