The primary focus of Chapter 13 is the chapter 13 plan of reorganization (""the plan""). The plan specifies how long you will remain in chapter 13 and your monthly payment amount. A chapter 13 plan can last for as long as five years. In a chapter 13 plan, you are not required to repay all of your creditors in full, and your plan payment is determined by your income and expenses.
The chapter 13 means examination determines the specifics of the chapter 13 plan. The means test is utilized to determine your monthly disposable income (""""DMI""""). The means test begins with the average of your six-monthly total income. Then, you subtract your living expenses. Expenses for living are based on IRS guidelines. You are also permitted to deduct mandatory income deductions from your gross income, such as income tax, social security, Medicare, child support or alimony payments, and other mandatory deductions. Additionally, you may deduct payments on secured debts, payments on arrears for secured debts, back taxes, and plan administration expenses. After making all of these deductions, you arrive at a final number. This is your DMI identifier. The DMI number represents the chapter 13 monthly payment sum. As shown, the chapter 13 plan payment is only determined after all of these deductions are made.
Chapter 13 is frequently used to prevent foreclosure. This is due to the fact that chapter 13 allows you to make up delayed payments over the course of the repayment plan. If you have experienced a decrease in income or interruption in income, you can use chapter 13 to catch up on your mortgage payments. Similarly, if you own property that could be seized and sold in a chapter 7 bankruptcy, you can file a chapter 13 to protect that property and still receive a discharge.
Additionally, Chapter 13 can be used to pay delinquent taxes that cannot be discharged under Chapter 7. Due to your other expenses, it can be extremely difficult to catch up on back taxes. In Chapter 13, back taxes can be paid before other unsecured creditors. This means that your other unsecured creditors, such as credit card companies and medical providers, must take whatever is left after taxes are paid. This can substantially reduce the time required to pay back taxes while also addressing other debts.
Chapter 13 is a potent option for individuals who want to save their home from foreclosure, pay back taxes, and protect valuable property, or who cannot file Chapter 7. Because chapter 13 entails a repayment plan and is therefore more complex than chapter 7, you should consult with an experienced bankruptcy attorney who can assist you in filing chapter 13 and implementing a successful chapter 13 plan.""
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