Posted by Ryan Blay on June 10th, 2010 in Chapter 13, Illinois, Wisconsin, budget, Chapter 13, equity, means test, plan payments, Supreme Court
The Supreme Court has finally told us how to figure out how much you need to pay in a chapter 13 plan..
The first question we hear after mentioning the basics of how a Chapter 13 works is “how much will I have to pay?” We need to know your “projected disposable income.” Until now, we really didn’t know how to figure this out. The Supreme Court has cleared up a lot of uncertainty about this, particularly when your income over the past few months includes large payments which you won’t be getting in the future. Until now, large one-time payments, like severance pay, could distort your income for “means test” purposes and therefore for purposes of figuring out how much you need to pay under a chapter 13 plan. Unfortunately, without sitting down, completing a full “means test”, a budget, and checking for equity in property, we couldn’t say for sure. We can try to give a good estimate. It’s completely unfair to expect someone to pay money based on income from the last six months if there was an unusually high amount of money, something that won’t be repeated going forward.
Now the Supreme Court has given us guidance we can rely upon in advising you in Chapter 13 cases. Here’s what happened. Ms. Lanning filed a bankruptcy after she lost her job and started a new job. During the six months before her filing, she received a severance over two months. That severance made her look like she was a wealthy woman and put her above the median income level for a single woman in Kansas. Although her budget showed she had about $144 per month to pay to a Chapter 13 plan, her “means test” told the courts she should really be paying much more – $756 per month – over $600 more than she could afford!
Ms. Lanning proved that a one-time event that is certain not to happen again was the cause of this inflated amount. The Supreme Court sided with her and said that her “projected disposable income” – the amount she needed to pay every month into her bankruptcy plan – was more accurately reflected by her budget.
This case can cut both for or against people who may file chapter 13. But at least we can tell you what to expect with a high degree of certainty. The most important thing you can do to determine what you should be paying to a Chapter 13 plan is to speak with a qualified attorney to review your case completely and let them fight for you.
Lakelaw files Chapter 13 Bankruptcies in Wisconsin and Illinois and can help you understand how plan payments work in Chapter 13 in compliance with the Supreme Court’s Lanning decision. Call 262-694-7300 in Wisconsin or 1-866-LAKELAW in Illinois today so that we can help you get out of debt for good.