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dmagnum

How much more can a Trustee recommend that you pay monthly at conf hearing?

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I filed for Chapter 13 due to divorce, taking on more debt from previous marriage than I should have, legal fees, etc. I'm awaiting my hearing. At first, the bankruptcy attorney I hired said I'd likely qualify for Chapter 7. After I paid the retainer and provided all paperwork, he told me I qualified for Chapter 13 and he's proposing that I pay $360 a month. His associate said the Trustee might ask at the hearing that I pay more than that and we'll try to meet in the middle. I'm a nervous wreck worrying about how much more I will have to pay. Has anyone experienced a similar situation? Thanks.

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First off, I would go back to your attorney and ask why you did not qualify for a Chapter 7. Did you not provide some information about your income or did they mislead you so that you would retain them?

As for what the trustee can ask for in a monthly payment, they will calculate the payment you can make based on the allowances the IRS uses to determine what you can pay them which is rather skimpy. That is why most Chapter 13s don't work. I would do my own research to come up with a likely figure the trustee will recommend:

https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-standards

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If, after completing the means test you have excess disposable monthly income you generally do not qualify for a Chapter 7.  If you file a Chapter 7 you could be forced out of it by either a dismissal or a stipulation to convert to a Chapter 13.  If you do a Chapter 13 you are stuck in a 60 month Plan.

A lot goes into determining what your Plan payment will, in the end, be. Form 122C (means test) which states as your “disposable monthly income”, what could be paid to the general unsecured creditors through the Plan, is not necessarily the issue.  The means test is a backward looking analysis.  Schedule I and J (your current budget based upon your current income and current expenses) is a forward looking analysis.

Assuming you do not “qualify” for a Chapter 7 and elect to file a Chapter 13, generally your real budget (Schedule I and J) will determine your monthly Plan payment. This means that you may end up paying more to your creditors than what is minimally required.  If, in the end, you are going to pay the equivalent of 100% of all debt you may wish to utilize credit counseling instead of bankruptcy.  There are advantages and disadvantages to either solution.

You should sit down with your attorney to review the means test to make sure nothing was missed and, if you are stuck in a Chapter 13, determine what you can afford to pay based upon your local procedures.  Just remember, you will be expected to do some belt tightening as it relates to non-essential expenses.

Des.

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