By Jeff Curl, San Mateo Bankruptcy Attorney
If you have been reading up on Chapter 13 bankruptcy, you know that you have to make a monthly payment for a period of time. Once you complete your plan payments, the remaining amount owed to your unsecured creditors is discharged. Sometimes you pay them 0%, 100% or usually something in between. This number varies by each case.
The number one question I am asked about filing for Chapter 13 is “How much will my monthly payment be?”
This depends on a lot of things, including your income, expenses and assets for starters. The most common way a Chapter 13 payment is calculated is by taking your income and subtracting your expenses, yielding a monthly payment. It’s actually much more complex than that, but that is the gist of it.
This leads to the implied question in Chapter 13 and your monthly payment, i.e., what expenses are allowed and appropriate. Most of my clients will understate expenses, often stating little to zero is spent on clothing and entertainment. While there is some sense of austerity that comes with filing Chapter 13, you are not expected to go without clothing and catching a movie or visiting a museum.
That’s right, Chapter 13 does not make nudity and boredom mandatory.
There is a concern by my clients that they will be placed on the stand in the courtroom and crucified for every dollar they spent. It just does not work that way. That said, your budget must be reasonable. $1,000 a month for entertainment is not going to fly. And there are conventional truisms such as never driving a car nicer than the judge. I don’t know which car most judges drive, so that’s difficult to measure. But you get the idea.
But if you have a housecleaner, a nanny, a finely manicured topiary, weekly haircuts, and you are not willing to sacrifice any of these costs, Chapter 13 may not be for you. While you are not required to eat rice and beans, eating at Michelin rated restaurants with regularity is probably not going to happen.
The sacrifice you have to make is actually pretty reasonable: live within your means. Chapter 13 is essentially a structured economic environment designed to keep your finances in order so that you succeed.
So while some reasonableness is required to file and succeed in Chapter 13, starvation and nudity is not.
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