Question Chapter 13 payment high due to home equity

[IJT]

My lawyer told me my payment is going to be high because I have a lot of home equity. My wife is going to retire early next year, our lawyer said he reduction of income, from salary to SS, I'm already on SS due to a disability, will not matter to the court. Has anyone else encountered this. The payment is okay now, but it will be to high when she retires. He suggested we sell our home and pay off our debt. If we sell, we'll have no place to go, rentals are currently more then we pay for our monthly mortgage payments.

[justbroke]

Yes, this is standard for Chapter 7 or Chapter 13. Rather than liquidate, in a Chapter 7, the Chapter 13 uses the so-called "Chapter 7 liquidation test" to determine what you would have paid in a Chapter 7. Once that amount is determined, that's the minimum that you pay in the Chapter 13 to the unsecured creditors. It doesn't include any other secured debt, attorney or Trustee payments that are also required in the plan.

So, "chapter 7 liquidation test" amount + attorney fees + trustee fees + secured debt payments / 36 (or 60) = your monthly payment.

The major issue with any bankruptcy will be non-exempt equity in property (homes, cars, and even personal property).

[IJT]

Thank you very much.

[justbroke]

I should also mention that your disposable monthly income (DMI) calculation matters as well, If the DMI times 30 or 60 > the "Chapter 7 liquidation test" amount, then you must pay the DMI as the minimum (times 30 or 60 depending on your plan duration).