The "Best Interest of Creditors" Test Explained
When you file for Chapter 13 bankruptcy, the court tackles the task of approving a repayment plan that's fair to both you and your creditors. To do this, courts consider what you would have paid each creditor under a Chapter 7 plan after your property was sold off. This “best interest of creditors” test can determine whether Atlanta or Fulton County courts approve your plan.
The Craig Black Law Firm helps hardworking families across Northwest Georgia who are considering bankruptcy to manage mounting debt. If you're facing foreclosure, repossession, wage garnishment, or unrelenting debt collection calls, we can help. Call us at 678-888-1778 or fill out our contact form to get in touch.
What the Test Actually Measures
The “best interest of creditors” test weighs your Chapter 13 path against a Chapter 7 filing. If you'd filed Chapter 7, the trustee would sell off non-exempt assets to repay creditors. Chapter 13 lets you keep that property, but you'll make payments over the next three to five years. The court will ensure that your creditors receive as much under Chapter 13 as they would under Chapter 7.
This is where we see many Chapter 13 plans fall apart. To be court-approved, the plan needs to show at least that you're paying the value of your property minus your remaining loan balances and any legal exemptions.
What Can Raise the Amount You Owe
A few things tend to increase a payment plan amount. Understanding them from the start can help you make sure your plan is approved.
- Homeownership: Home equity raises what you have to pay, so in areas with rising home prices like Sandy Springs, filers often find they're paying more.
- A paid-off vehicle: If you own your car, it might have been sold under Chapter 7, so it needs to be included in your plan.
- Recent property transfers: If you've recently sold or transferred assets, the court may include the value of those items in your repayment plan.
None of this activity makes you ineligible for a Chapter 13 filing. It simply highlights the importance of consulting an attorney before you submit your disclosures.
Your Home, Your Car, and Your Future Are Worth Protecting
The “best interest of creditors” test can derail a Chapter 13 filing before it even starts. Too often, the ones it hits hardest are those who most need relief. By reaching out to an attorney who understands how this test works in Fulton, Cobb, and Rockdale County courts, you'll have the best chance of getting your repayment plan approved.
If you're in the greater Atlanta area and overwhelming debt has you considering bankruptcy, reach out to the Craig Black Law Firm through our contact form or by calling 678-888-1778. Craig Black answers the phone himself, so you'll be connected immediately with someone who fully understands the bankruptcy process.