Understanding Bankruptcy, 4/26/18

Filed under: Latest News |

BY MICHAEL A. CIBIK, ESQUIRE
AMERICAN BANKRUPTCY
BOARD CERTIFIED

Question: High-income bankruptcy debtor? Be prepared for a five-year Chapter 13 plan!

On Aug. 29, 2013, the 9th Circuit Court of Appeals court issued a decision in a bankruptcy case dealing with above-average-income debtors. The case name is In Re Flores (Ana Flores v. Rod Danielson). The Flores 2013 case states that an above-median-income debtor MUST be in a 60-month Chapter 13 repayment plan.

What does that mean? Well, in 2005, a new form was created and every debtor with above-median income (above average, as determined by the IRS and the United States Trustee’s Office and re-evaluated every six months) must use this new 7-page form, a Form 22, which applied this new formula taking deductions from the monthly average until the end of the form. At the end of the form will be a number – either a positive number or a negative number. That number determines whether folks should not have to pay their unsecured creditors (a negative number) or should have to pay their unsecured creditors a certain amount (that positive number times 60 months). Over the past eight years, there have been many court cases which tried to interpret what this new formula means for everyday folks. And watching these court cases has been like watching a table-tennis match between players as the ball bounces back and forth.

The 2013 Flores decision finds that the debtors must be in a 60-month plan. Thus, even though a debtor’s payments to unsecured creditors will, at least initially, amount to $0 if the debtor has no projected disposable income, the statute requires the debtor to commit to the plan for the duration of the applicable commitment period.

Next Week’s Question: Filing bankruptcy: Do I have to keep my condo, or can I surrender it?

JOIN OUR NEWSPAPER
Join over 3.000 visitors who are receiving our newsletter and learn how to optimize your blog for search engines, find free traffic, and monetize your website.
We hate spam. Your email address will not be sold or shared with anyone else.
Share
en.pdf24.org    Send article as PDF   

Leave a Reply

Your email address will not be published. Required fields are marked *