If you need help with the debts you are drowning in, you might decide to turn to Chapter 13 bankruptcy. This branch of bankruptcy is the branch that requires repaying debts, but you might not have to repay all the debts you have. This decision will often be dependent upon your disposable income, and here are three things to know about disposable income.
What it is
The first thing to understand is what disposable income is, and this is something that you should understand before you file for Chapter 13. Disposable income is the amount of money you have left after paying all your bills. Disposable income is money that you have available to spend on anything you would like and in any way you choose. In Chapter 13 cases, disposable income is a very important amount to calculate as it will affect certain things in your case.
How it is calculated
To calculate your disposable income, you must subtract your main bills from your income. To do this, you must start with your monthly income. Next, add up all your main bills, including your house payment, car payments, utilities, insurance, and any other necessary bills you must pay. After subtracting your bills from your income, you will need to take one more step before you can find out your disposable income, and this last step is subtracting all the extra expenses you have each month, such as gas, groceries, and clothing. Once you subtract this from your amount, you will know exactly how much money is left over, and this will be called your disposable income.
The effects it has on repaying debts
One of the main reasons your lawyer will perform this calculation is to see if you have enough money leftover in your disposable income to repay any debts that are not priority debts. Debts in bankruptcy are divided between two categories, which are priority debts and non-priority debts. Priority debts must be paid in full in Chapter 13 cases, but the non-priority debts must only be paid if you have enough disposable income to pay them. If you do not, the court will likely forgive these debts when you complete your repayment plan.
Chapter 13 bankruptcy will require the repayment of debt, but it can be a great tool to use in certain situations. If you want to find out more about Chapter 13 and its benefits, talk to a company that provides law firm services today.
