Arriving at the Monthly Repayment Amount

Interviewer: Is it a percentage of someone’s income or does it vary from case to case?

Secured Debts, the Attorney and Trustee Fees Are Paid in Full over the Course of the Payment Plan

Court Koehler: It’s not necessarily based on a percentage. It’s a complicated process, but let me try to provide a little more detail. When you pay the plan, basically you add up all the debts that need to be paid off, so there’s the trustee’s fee and then there’s your attorney’s fee that go in there, and then any of the back payments that you have on your assets. All of those things need to be paid off 100% in full.

A Portion of Unsecured Debt Is Paid

On top of that, sometimes you have an additional amount of money that you need to pay back toward your unsecured debt. Those are debts like your credit cards or your medical bills. Debts that are not attached to sort of any collateral backing are called unsecured debts.

Sometimes you don’t need to pay anything to those debts at all, but sometimes you need to pay some, and it depends on your income and how much you owe. Sometimes you have to pay a low percentage. It’s difficult to calculate. Maybe somewhere between 1 and 5% is usually how much you’re looking at.

Some plans you end up paying back all of your unsecured debt, and some plans you don’t pay any of your unsecured debt. It just depends on a case by case basis what your situation is.

There is usually a large portion of debt that will be forgiven at the end when you have the bankruptcy discharged, but it is unsecured debt that will be forgiven.

Interviewer: What if someone’s only income is their retirement benefits? Could they utilize those to pay their payments?

Court Koehler: Yes, that would be part of your income. So yes, you could do that.

By Court Koehler

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