What if someone was receiving only retirement benefits; could they utilize those funds to make payments?
We use all sources of income, retirement, rental payments, regular income, EDD, if you are on an employment, we can use that employment because at that point, it’s a question of feasibility. Are you making enough money to be able to pay it back what you’re proposing to pay back? Most people, especially with the elderly, who are on a fixed retirement income, the income is not enough to pay back the debt. It might be barely enough to cover their expenses, so then you have a feasibility problem and Chapter 7 might be better for you. But we do have retired individuals who have a pretty good pension, and they’re in a Chapter 13 and taking their house or paying back tax liability. Maybe you pulled out of a 401-K too soon and you’ve incurred a tax penalty that you can’t pay back right away, we do have cases like that. The important thing is to explore all the possibilities.
The secured creditors are usually first in line, the priority creditors are next in line and then, the secured creditors are last. So, we’re not going to start paying the unsecured creditors until the secured creditors and the priority creditors have been paid in full.
If you have, let’s say, 50 per cent plan, 50 cents on the dollar, it’s what we call Pro Rata Distribution, which means we take all of your debts and we line them up and categorize them. And if it’s an unsecured creditor, we’re going to pay that unsecured creditor based on the size of their debt in comparison to the other debts. And then, we’re just going to pay them every month and so, they’ll get paid their 50 per cent share. Now, I think your creditors are last in line.
As far as how often do they get paid, that’s determined by your plan. Like I said, if you have a 0 per cent plan, that means that you’re not paying your unsecured creditors, so they won’t get paid at all. And at the end of the bankruptcy, you’ll get discharged. If you have a 100 per cent plan, then they will get paid their full claim but they’ll get paid over the course of 5 years.