Disposable Income

[brokeinfl]

Does anyone have any experience with your diposable income being too low to be allowed to file Chap 13? I have a paid off vehicle that I need to keep in the household that would be sold under chap 7.

[justbroke]

Does anyone have any experience with your diposable income being too low to be allowed to file Chap 13? I have a paid off vehicle that I need to keep in the household that would be sold under chap 7.

I am in a Chapter 13, and don't have this problem.

However, I can refer you to the issue. The real issue is defined by the Bankruptcy Code. In a Chapter 13, you have to pay to your unsecured creditors at least as much as they would get if you had filed Chapter 13.

So, it comes down to what the non-exempt equity you have in assets. (Also known as the amount the unsecured creditors could claim against in a Chapter 7 straight liquidation.)

Since you now own your vehicle, you need to see what exemptions that you have. Depending on your State, you could have anywhere from $1,000 to $5,000 or more in exemptions for that vehicle. Depending on your State, you may have a wildcard or "unused" homestead exemption which may be as much as $20,000 which could cover that vehicle.

Again, it will depend on how many non-exempt asset you have. This is regardless of whether you file Chapter 7 or Chapter 13. It's all about the Assets!

[brokeinfl]

Thanks for the reply! I think this is all beginning to make some sense. If say I've got 10,000 in unsecured assets, and very little disposable income, I would still pay that amount back just the same as a chap 7, but get to keep them. Again, thanks!! Maybe its stress, but The BK thing hasn't been that easy for me to grasp.

[justbroke]

Thanks for the reply! I think this is all beginning to make some sense. If say I've got 10,000 in unsecured assets, and very little disposable income, I would still pay that amount back just the same as a chap 7, but get to keep them. Again, thanks!! Maybe its stress, but The BK thing hasn't been that easy for me to grasp.

Let's put it in perspective.

If your only asset was a car. You lived in Florida. The car was valued at $16,000. You own the car outright (no liengs). Only you are applying (no spouse).

Given that, you would have a $1,000 exemption for one car you can apply. Given that you would have a $1,000 wildcard exemption for one car, which you can apply. And, given that you have the $4,000 unused homestead exemption (in Florida), than you can apply...

In a Chapter 13, you'd have to, at a minimum, pay back unsecured creditors at least $16,000 - $1,000 - $1,000 - $4,000 or, simply, $10,000.

This is why some people can't "afford" a Chapter 13. This is because they have non-exempt assets that they want to keep, but simply don't have enough money (income) to fund a Chapter 13 repayment plan for the $10K.

My previous post should have read

The real issue is defined by the Bankruptcy Code. In a Chapter 13, you have to pay to your unsecured creditors at least as much as they would get if you had filed Chapter 7.