Schwartz Bankruptcy Law Center
Louisville 502-485-9200
New Albany 812-945-9200
Toll Free 866-366-3328

Louisville Bankruptcy Legal Blog

What is "disposable income" in a Chapter 13?

Families in Kentucky who find themselves in financial trouble may elect to file a Chapter 13 bankruptcy, opting for a three-year to five-year repayment plan in lieu of turning over non-exempt property and dealing with their debts all at once. For those contemplating this type of bankruptcy, it may be helpful to have some understanding of "disposable income" and how it is figured. However, as with other legal concepts, detailed questions about one's disposable income are best raised with an experienced bankruptcy attorney.

Basically, in order to get a repayment plan approved, a family is going to be expected to commit all of their "disposable income" to paying down their debts. The law defines "disposable income" as the amount of money a debtor makes, child support excluded, minus whatever the debtor is spending to provide reasonable support to themselves and their families. If a debtor is a business owner, that person may also deduct business expenses. Additionally, debtors are allowed to contribute up to 15 percent of their income to charity and may take a deduction from their disposable income to that extent.

Money woes play a role in Kentucky's "stressed" status

According to a recent report, Kentucky ranks in the top 20 percent of the "most stressed" states, coming in 9th among all the states and the District of Columbia.

Not surprisingly, money trouble played a role in the state concerning its "stress" ranking. With respect to stress related to finances, Kentucky came in 8th out of all the states. Kentucky's rating for health and safety issues was also worrisome, especially given that this report considered whether and to what extent people were able to afford their health insurance premiums and out-of-pocket costs.

It may get easier to discharge student loans in bankruptcy

While a Chapter 7 bankruptcy can, for the most part, wipe out debt effectively, student loans are a well-known exception to this rule. Most Louisville residents may not even think to ask their bankruptcy attorneys about their student loans, and, if they do, the standard advice may be that it is very hard to get student loans discharged. Instead, Kentucky residents may be able to use the bankruptcy process to clear away other debts in order to focus on re-paying the student loans in full.

The reason it is so difficult to discharge student loans debts in a bankruptcy is that a person can only do so if the debt is causing "undue hardship." The problem, however, is that the term "undue hardship" never got clearly defined in the language of the bankruptcy laws.

The ways credit card companies target "Millennials"

The generation known as "Millennials" have been a hard market for credit card companies to crack. As opposed to older generations, those born between 1981 and 2000 are relatively reluctant to use credit cards, with half of them opting to carry only one credit card. Older generations, on the other hand, are more likely to carry several credit cards.

There are a lot of reasons for this, and credit card companies are getting better attuned to these reasons as time goes on. As a result, they are trying new techniques, with some success, that are designed to draw in Millennials.

Common mistakes to avoid before filing for bankruptcy

If you have made the decision to file for bankruptcy, you may breathe a bit easier, but still feel overwhelmed.

You might therefore consider taking action in certain ways that could be very damaging. Here are five common mistakes to avoid when you are facing bankruptcy.

Chapter 13 and car repossession threats

Aside from maybe a foreclosure notice or a garnishment, there are few things that disturb a Louisville resident's financial peace more than getting a notice that their car is about to get repossessed. Worse, some families may wake up one morning to discover that the vehicle they counted on is gone, legally seized by a repossession company working on behalf of a bank or financing company.

A Chapter 13 bankruptcy can be a valuable tool for slowing down or even stopping this scary situation. Moreover, it can also protect the family's vehicle so that they can in turn be used to generate income and keep their household financially afloat and running relatively smoothly.

Tough market for retailers in Louisville continues

As a previous post here detailed, the retail market, which includes so-called "brick and mortar" clothing and other stores as well as restaurants, is a hard market to make a profit in right now. This is due in part to Amazon and other online retail outlets that offer customers the convenience of shopping in their own homes and having items delivered to their doorsteps.

However, the reality is that, despite a slew of retail bankruptcies and some reorganization efforts on the part of other companies, there are still too many retailers for all of them to be sustainable in today's economy. As such, it's not a surprise that the number of retailers closing their doors broke records last year, surpassing even the number of retailer bankruptcies during the so-called "Great Recession."

The goal of Chapter 13 is an affordable repayment plan

As previous posts here have discussed, Chapter 13 bankruptcy is distinct in that a Louisville family who chooses this option will be expected to repay all or part of their debts. More specifically, the family will get to hang on to all of their property, but they will need to make monthly payments to a court officer, called a "trustee," for anywhere between three and five years. At the end of the day, the family will be expected to pay at least 10 percent of their debts and may need to pay up to all of their debts off.

The goal in any Chapter 13 bankruptcy filing is for the family to be able to make their monthly payments as agreed throughout the entire time of the Chapter 13 case. When that happens, the family will receive a discharge from all other outstanding debts and will get the fresh financial start bankruptcy promises, all the while being able to keep their property and suffer less damage to their credit score and overall financial standing.

Local doctors' office files for bankruptcy

Although physicians are known for making a lot of money, they too can run in to financial problems and may even find themselves in a position where filing for bankruptcy makes the most sense.

For instance, a Louisville pediatric practice, which was organized as a professional limited liability company, recently filed for Chapter 7 bankruptcy in a Kentucky federal court. The office had been in business for over 30 years, and, at the time of the filing, was owned by three doctors.

Preparation for bankruptcy includes credit counseling

There are projects that will keep you busy as you prepare for bankruptcy. One will involve pulling together documents that will be essential to the filing.

As you are organizing your paperwork, you will also need to obtain credit counseling.

  • NACBA- National association of consumer bankruptcy attorneys
  • LexisNexis- AV -Peer review rated
  • Kruger & Schwartz BBB Business Review
Contact Our Attorneys

Privacy Policy | Business Development Solutions by FindLaw, part of Thomson Reuters.

Back to top