OK someone please tell me

[michele71]

I have been reading the forums here and I have a question that maybe some may have as well. I keep reading, "The creditors must get paid at least as much as they would if you filed for Chapter 7."

How much do they get paid???? Is it a certain amount per dollar or what?

The reason I am asking is because I am sure the trustee will at least try to raise my payment that the lawyer has figured out but I would like to know the answer to this question so I can get an idea of what I may be looking at.

Thanks

[justbroke]

I have been reading the forums here and I have a question that maybe some may have as well. I keep reading, "The creditors must get paid at least as much as they would if you filed for Chapter 7."

How much do they get paid???? Is it a certain amount per dollar or what?

Think of it this way...

Say you have a car you own outright. It is valued at $10K. Let's also say that your State has a vehicle exemption of $1K and a wildcard exemption of $4K. Let's also say that you used up your wildcard exemption on furniture and other property like clothing, computer, VCR, refrigerator, etc.

Since your wildcard exemption is all used up, you only get to apply the $1K exemption to the value of your car. That means that $9K of the car's value is non-exempt.

So, in your Chapter 13, let's say that your Disposable Monthly Income (DMI) is projected to be $100/month for 60 months. That is, that after calculating your income and deducting the IRS allowable deductions, and to pay for other secured creditors, the total that unsecured creditors would receive through your Plan would be $6,000.00 over 6 months ($100 x 60).

In your case, this Plan wouldn't be confirmed, unless you increase your Plan payments by at least $50.00/month so that the unsecured creditors get "at least as much as they would had you filed a Chapter 7" and liquidated your non-exempt assets. Because $150 x 60 = $9,000.00, where $9,000.00 is the minimum you must pay to the unsecured creditors.

Does that help?

[HHM]

Couldn't have explained it better myself

[justbroke]

Couldn't have explained it better myself

I follow your example.

[michele71]

Sooooo...i dont own anything---i am paying a mortgage that I have about 15k in equity in....does this mean as long as I pay them 15k then they get what they would have gotten in a 7?? I know i dont sound smart but it is all so complicated

[justbroke]

Sooooo...i dont own anything---i am paying a mortgage that I have about 15k in equity in....does this mean as long as I pay them 15k then they get what they would have gotten in a 7?? I know i dont sound smart but it is all so complicated

Well... you should be able to use some sort of homestead exemption in your State. If you tell me your State, I'll find out how much of a homestead exemption you can claim.

If your State has a very liberal homestead exemption (and it doesn't even need to be like Florida's infamous unlimited homestead exemption), then you may not have to pay the unsecured creditors anything.

Note, just because I wrote have to pay, doesn't mean you won't. This is because your disposable monthly income (DMI) is what determines what you'll minimally pay.

[michele71]

yeah i know WA State (where i am) there is a 125k homestead exemption...so I guess I am not required to pay anything. thanks just great explaning!! You guys are so smart

[justbroke]

yeah i know WA State (where i am) there is a 125k homestead exemption...so I guess I am not required to pay anything. thanks just great explaning!! You guys are so smart

Not so simple for WA State. The unused exemption, based on what I read, is only $8,725.00. However, they have many exemptions covering clothing, appliances, cars, and a wildcard.

Looks like at least about $15K overall (with $8,725 in wildcard). However, they are stingy when it comes to cash as the wildcard can only be used on up to $200 in cash.

Anyhow, you'd apply your homestead exemption to the $15K in equity, and should be okay. The rest of the WA State exemptions should cover a good portion of your household goods and other personal property (looks like easily $7K). Also, you can use the Federal Exemptions instead of the WA State exemptions. You and your lawyer will decide which is best.

[michele71]

Yeah I am fine under exemptions--no issue there. Right now unless the trustee changes things I am at 18% payback to unsecureds. I understand how the "must get what they would under Ch 7" means now. Thanks so much.