Why is my chapter 13 payment higher than my neighbor’s?

First off, stop comparing yourself to your neighbors.  It’s never a good idea to keep up with the Joneses.

Your payment might be higher because you make more money, because you owe more on mortgage arrears and car payments, or maybe because you have more assets free and clear.

I received a call from a woman yesterday who became frustrated with me very quickly.  After I spoke to her, I told her that she would probably have to file a chapter 13 with payments of about $300 a month over the next five years.  She said, “I have never heard of someone having to pay their creditors back in bankruptcy.  I’m going to get a second opinion.”

She and her husband were above median with no kids and no car payments.  They owned his fairly new truck free and clear, had a some quad runners, and a boat, all with no liens.  She did not like my answer that she would have to pay the equity (value) of those things to her creditors or risk losing the truck, the quads, and the boat.  Even worse, with their income, they may have to pay a higher payment based on calculations we run comparing them with the Utah median income figures.

So your payment may be higher.

1.  Higher income — if you make decent money, then you will have to present some kind of repayment plan to your creditors in most cases.

2.  Higher mortgage arrears or car payments — if you owe more on secured collateral that you want to keep, you have to pay more money than your neighbor who isn’t making those payments.

3.  You own toys free and clear — if you own a boat, or 4-wheelers, or even have too much equity in your home or vehicles, you may have to present a payment plan to protect the value of the items I cannot protect.