Bankruptcy in the U.S. is designed to give debtors methods of working through their financial obligations in a way that offers more leniency and payment options when repaying accumulated debt. Whether you file for reorganization or liquidation types of bankruptcy, you’ll be given a set of options that will help solve your debt case. However beneficial bankruptcy is to the filer, the process must also be equitable to the creditors involved. Behm Law Group, Ltd. offers legal advice and assistance that will help you navigate through your petition for Chapter 7 or Chapter 13 bankruptcy in Fairmont, MN.
If you file for reorganization bankruptcy, it’s likely you’ll be filing for Chapter 13. In this case, you’ll be working with a bankruptcy trustee to establish a repayment plan. The results of this plan will allow you to reorganize how you repay your debts, changing the amount that must be repaid and the time period in which it’s repaid. Your plan can make your debts vastly more manageable given your financial situation, but it’s required to also meet the best interest of your creditors.
Whether your repayment plan is fair to your creditors or not is a status determined by the Best Interest of Creditors Test.
Best Interest of Creditors Test
In a nutshell, you must repay priority debt creditors, such as tax creditors or child support creditors, the full amount you owe. This is a standard for all Chapter 13 cases. What varies from case to case is the amount you’ll repay to your non priority unsecured creditors, such as medical debts and credit card debts. This is where the Best Interest of Creditors Test comes into play. What the test measures is how much you’re repaying to your creditors, and if that amount is fair. The bottom line is that your repayment plan must repay, at minimum, the amount that creditors would have received from your liquidated assets if you had filed for Chapter 7 instead. This in turn depends on your property values and the exemptions you can claim.
Not only does the test decide whether you’re meeting your creditors’ best interests, but it also partially determines how much you’ll pay to priority unsecured creditors in your repayment plan.
The Best Interest of Creditors Test is most effective in determining if you’re meeting the minimum requirement for amounts repaid to nonpriority unsecured creditors. It doesn’t take your disposable income into account, but that amount will be considered outside of the test to determine the maximum amount you must repay. For legal help with your repayment plan and working through filing for Chapter 13 bankruptcy in Fairmont, MN, contact Behm Law Group, Ltd.at (507) 387-7200 today.