What Is Considered During a Chapter 13 Feasibility Analysis?

For many people who have fallen behind on what they owe, a Chapter 13 bankruptcy seems like the right solution. This is particularly true for those who are earning a steady income, but can’t catch up after a financial setback, such as a divorce, accident, medical crisis or temporary job loss. Instead of discharging nonexempt debts like a Chapter 7 bankruptcy, a Chapter 13 proceeding gives filers the chance to develop a fair repayment schedule lasting three to five years while stopping creditor harassment. 

However, before a repayment plan is approved, the bankruptcy judge must rule that it is sufficiently feasible based on the information known at the time. Essentially, the bankruptcy court wants to know if you will have enough disposable income after covering your essential living expenses to make the proposed payments to your creditors. Several factors are considered during the feasibility test, such as:

• Available income — Given the duration of the repayment plan, the court examines current and expected future income sources, including wages, commissions and rental income. The amount needs to cover both living expenses and the monthly payments proposed in your Chapter 13 plan. 
• Anticipated expenses — Monthly living expenses are also scrutinized during the feasibility test. These include basic necessities such as housing, utilities, groceries, healthcare, transportation and other common household costs. Your attorney will prepare a detailed breakdown to show that your income is sufficient to address regular expenses and payments to bring down your debt. 
• Secured debts — A key reason why many people choose Chapter 13 bankruptcy is because it gives filers the opportunity to retain ownership of assets used to secure debts, such as mortgages and car loans. Part of the repayment plan must establish a framework for catching up on those obligations. 
• Duration of the repayment schedule — Chapter 13 repayment plans typically last three to five years. The length of the plan is another factor in the feasibility test. A longer plan means lower monthly payments, but the obligations still need to be sustainable over the entire term of the schedule.  

If your proposed repayment plan fails the feasibility test, the court will not approve it. You may be required to revise the plan, adjust your expenses or explore other bankruptcy options, such as Chapter 7 debt discharge. Working with a skilled bankruptcy attorney can help you craft a repayment plan that meets the feasibility requirements as well as your needs.

Jeff Field & Associates represents Georgia residents in Chapter 13 bankruptcies and other debt relief matters. From locations in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Scottdale, we develop thorough repayment plan proposals that satisfy both clients and judges. To discuss your situation, please call 404-381-1278 or contact us online.