How much do creditors receive in a chapter 13 plan?
The debtor must pay all his available disposable (after reasonable monthly expenses) income to the plan for at least 36 months. The creditors must receive at least as much money in chapter 13 as they would have received in chapter 7 (also known as the liquidation test). Secured creditors such as mortgage holders are generally paid in full or caught current with the chapter 13 payments. Priority claims, which include attorney fees, certain taxes and back alimony and child support, must be paid in full under the plan. Different plans will pay the unsecured creditors anywhere between 10% to 100% of their claim depending on the liquidation test and the debtor’s ability to pay. In the Eastern District of Michigan, a plan typically will pay the general unsecured creditors no less than 10 cents on the dollar. The plan must be feasible in light of income and expenses and must be proposed in good faith.
