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Projected Disposable Income in Chapter 13

February 23, 2010 | Comments: 0 | Views: 116

In determining "projected disposable income" for the purposes of creating a chapter 13 bankruptcy Plan, it is important to understand the flexibility you have when your finances change. This bankruptcy reorganization Plan under Chapter 13 can be proposed for 3 or 5 years depending upon your situation. Let's turn to recent case law to see how the courts address the issue.

One court recently held that an above-median income debtor seeking relief under Chapter 13 cannot deduct from his disposable income, a vehicle 'ownership cost' for a vehicle he owns free and clear, that would otherwise be income available to unsecured creditors. This case is one example of the court's plain reading of the statute in 11 U.S.C. Section 707(b)(2) that an ownership cost is not an 'expense.'

The 10th Circuit court reviewed the issue of whether 'projected disposable income' for purposes of chapter 13 plan confirmation should be obtained using the "mechanical test" set forth in the Code, or a "forward looking approach." The holding from a Supreme Court case says, "The mechanical approach 'subject to a showing of substantial change in circumstances,' in other words the forward looking approach." This case is currently pending before the Supreme Court. We are forward-looking to the outcome after the Supreme Court's review.

This issue is of national concern as Craig Anderson points out in his blog article, '"Projected Disposable Income" in Chapter 13 Cases: Rear-view Mirror, or Crystal Ball?' posted at the Bankruptcy Law Network. What these cases mean to our bankruptcy practice of chapter 13 cases is to really look at the individual circumstances of our clients. Every case is unique. The good news is that we have more control in chapter 13 and more options; such as timing the filing of the case; or request to modify the chapter 13 plan. As debtor's counsel, we must have a complete understanding of our client's goals and their particular circumstances so that we may present the best argument on their behalf.

Remember to maximize your income by adjusting your W2 income tax with-holdings so that you break even on your tax returns. Be sure to include some money being saved for retirement and cut all your unnecessary expenses to show good faith. Be sure to have candid and truthful conversations with your attorney and plan for home maintenance and repairs in your budget over the next 3-5 years. A Chapter 13 case is a long-term plan toward financial freedom and, if done correctly, will set you free from your debts and put you on the path toward retirement at the same time.

It's important to communicate with your attorney should your financial situation change during your repayment plan. Your attorney will represent you during the entire time you're in bankruptcy and should be available to answer all your questions. They will guide you through the process and advise you of your options if problems arise. Call your attorney immediately if you need to buy or sell real or personal property, such as an automobile; or if your income increases or decreases by 10%. Your plan can be modified, or temporarily stopped in some cases.

The Law Office of Christine A. Wilton is a Federal Debt Relief Agency. We help people file for bankruptcy under the Bankruptcy Code. Our practice is limited to Chapter 13 and Chapter 7 bankruptcy at this time.


Source: EzineArticles
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