A Chapter 13 Bankruptcy Attorney explains the Chapter 13 Plan, Part III: how much will my plan cost?

In Part I, I explained the basic concept of chapter 13 bankruptcy. And in Part II, I got into some detail about secured debt versus unsecured debt, and how it affects your chapter 13 plan. Now I’m going to get into what you are probably most concerned with considering chapter 13 bankruptcy with an attorney in Salt Lake City: how much you’re going to have to pay. So let’s get to it. 

Chapter 13 Bankruptcy battle plan

Your chapter 13 bankruptcy battle plan.

The (overly) simplified formula for monthly payment amount:

(secured debts in arrears + Chapter 13 attorney fees + Chapter 13 trustee fees)/60

If you have a very basic case, then this formula will get you a good idea of what you’re looking at. Let’s continue using our previous example of the person who is $3,600 in arrears (behind) on their mortgage payment. We’ll assume that the mortgage payment is the only secured debt this person is behind on; although this is usually not the case. Clients of mine are often behind on second mortgages, as well as car payments and other secured debts in addition to their mortgage. 

Next we get to Utah chapter 13 attorney fees. The good thing about chapter 13 is that there are statutory fee amounts, and your Utah bankruptcy lawyer will generally stick to those amounts. In Utah, attorney’s fees are going to be $3,000, $3,250, or $3,500 depending on the complexity of your case and amount of debt you have. Generally your attorney will require a down payment up front, and what that amount is can vary widely from attorney to attorney, and is also dependent on your individual circumstances.

By way of quick advertisement, I am currently offering Chapter 13 bankruptcy for only $200 down, which is a great deal. Depending on when you read this article, I may not be offering this any more. But, you should give me a call (801.200.3795) and mention this post to find out! 


So, to get our second number we’ll take the statutory attorney fee (we’ll assume the usual $3,250), minus the downpayment (we’ll assume $200 according to my current special), which gives us a remaining fee of $3,050, which will be payed over the life of the plan along with the mortgage arrears. 

Finally, we add the trustee’s fee. Assume the trustee’s fee is 10% of your plan payment amount. Performing the arithmetic to technical perfection can be tricky. Here, we’re just trying to get a basic idea, so we’ll just take 10% of the sum of the secured arrears and attorney fee. (3600+3050)x0.10=665

Our final formula for our hypothetical person is: [(3600+3050+665)/60]. This comes out to a monthly payment of just under $122 per month. So, our hypothetical person will be paying their regular mortgage, plus $122 per month to catch up their back mortgage payments over a period of 5 years. At the end of this period, their mortgage and other secured debts will be caught up, and any unsecured debt they have, including thousands in credit card and medical bills will be discharged (erased!).

Sounds like a situation that could help that person out quite a bit right? And often times, my clients end up with a payment plan similar to this. However, I am assuming a very basic case here, and there are many many nuances that could make this plan turn out quite a bit different. This article is getting a bit long, so check back and I’ll discuss those nuances in Part IV. For now, here’s a bullet list of the gravestones I’m whistling past: 

  • Plan length – the plan may be shorter, and the payments larger. 
  • Amount due to unsecured creditors – in some cases, clients will be required to pay back a portion of their unsecured debts
  • Disposable income – in general, clients will be required to pay all of their disposable income into the plan. Thus, how disposable income is calculated becomes very important – and is one of the reasons you really need a Chapter 13 bankruptcy attorney if you’re filling bankruptcy in Utah. 
Click here to visit my website and contact me to discuss your financial trouble, I’m glad to help!

A Chapter 13 Bankruptcy lawyer explains the Chapter 13 plan. Part II: treatment of secured and unsecured debts.

Hey folks! in my previous post, I explained the basics of the chapter 13 plan, click here to read that. Now lets get into some more detail.

Let’s keep using our example of a person who’s got a $3,600 arrearage, but we’ll make it a bit more realistic, shall we? Because no one who comes to see me about bankruptcy is behind on just one debt. There are usually some credit cards, and some medical bills mixed in. So imagine this person is $3,600 behind on their mortgage, but they’ve also got $8,000 of credit card debt and $10,000 dollars of medical bills. That means they’ve got $21,600 of debt. In a three year plan, would they have to pay all of that off, plus keep making their mortgage payment, because that would cost them $600 per month on top of their mortgage!

The good news is that is not how it works. The person in our example does not necessarily have to pay back all of credit card debt and hospital bills. In fact, in many situations they may not have to pay back any of the credit card and medical bills. This is because of the difference between secured and unsecured debts – the chapter 13 debtor must pay back all the arrearage on her secured debts, but does not necessarily have to pay back all of their unsecured debts.

A secured debt is a debt that is backed by some type of collateral. The most common examples are mortgages and car loans. Loans used to buy furniture, or for house repairs, etc may also be secured in some instances. These loans are called “secured” because the debt is secured by the item of collateral. Thus if the debtor defaults (stops paying), the creditor can sell the collateral and get their money back. That is what happens when a house is foreclosed or a car is repossessed.

Debts like pay-day loans, utility bills, medical bills, and credit card bills are not backed by any collateral, and are thus “unsecured”. In a Chapter 13 plan, you must pay all the back payments on secured debts over the life of the plan, but how much you pay to the unsecured creditors depends on your income and the plan length. Sometimes you pay nothing at all to the unsecured creditors.

Check back next time, we’ll discuss how you income affects the plan length and payment amount.

Click here to visit my website and contact me to discuss your financial trouble, I’m glad to help!