Chapter 13 Payments Before New Bankruptcy Law

Calculation required by new bankruptcy laws for current Chapter 13 payments

In the past, individual debtors paid at least the value of their non exempt assets. In practice, a Trustee recommended approval or denial of the amount of the monthly plan to the court. Confirmation and discharge of obligations beyond the capability of individuals was allowed in partial plans. Discharge was obtained in as little as 3 years. The amount of monthly payments depended largely on a financial analysis conducted by trustees and the judicial philosophy of judges in evaluating each case.

Before the new bankruptcy laws became effective

In general, Chapter 13 required regular reduction of amounts owed within the capability of each individual, but minimums were affected by non-exempt property retained. The actual amount paid was a result of balancing interests between individuals, their creditors and a trustee's evaluation, under the watchful eye of court supervision.

After the new bankruptcy law changed

A couple each earning minimum wage jointly earn (($5.25x40) x 52 weeks) x2) = $21,840 per year. With no dependents, according to the above schedule, they are $9,720 over the poverty threshold, or stated similarly, earning 80.2% excess annual income. New bankruptcy laws will incorporate poverty levels and median (average) income levels to bar bankruptcy relief. In particular, if any debtor filing bankruptcy under new bankruptcy laws exceeds the state poverty level, new bankruptcy laws prevent relief and cases must be dismissed. New bankruptcy laws are expected to become law at any time. In essence, anyone earning above the poverty level will be limited to Chapter 13 under the new bankruptcy laws.