Understanding Bankruptcy 2/20/2020

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BY MICHAEL A. CIBIK, ESQ.
AMERICAN BANKRUPTCY BOARD CERTIFIED

Question: What is the “best effort” requirement in Chapter 13 bankruptcy?

Answer: In Chapter 13 bankruptcy, the bankruptcy court must approve your repayment plan before it can be finalized. In order to be approved, you have to show that you are using your “best effort” to repay creditors with your disposable income.

Disposable income is the money that remains after deducting allowed living expenses (rent, utilities, food, etc.) and mandatory payments such as secured and priority debt payments. These payments are made first and then any additional disposable income must be paid towards non-priority, unsecured debts, including credit-card and medical bills.

How much you have to pay in your repayment plan will depend on your income compared to the state median income for a household of the same size. If your income is below the state median, the payment plan is based on your budget and is usually approved even if you pay little to non-priority, unsecured creditors.

If the “best effort” is made during the entirety of the repayment plan, then the remaining non-priority, unsecured debt will be eliminated at the end of the repayment period.

Next week’s question: What is the pre-bankruptcy credit-counseling requirement?

Michael A. Cibik, Esquire
www.ccpclaw.com
ccpc@ccpclaw.com
215-735-1060

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