How Important Is Your Best Effort in a Chapter 13 Bankruptcy?

The repayment plan that you submit to the bankruptcy trustee after you file for Chapter 13 must be based on good faith or your best effort. If your plan does not fit the best effort requirement, there is a possibility that your plan will be rejected. To avoid problems, it is important to understand what "best effort" entails and how you can meet it. 

What is Your Best Effort?

Your repayment plan is a proposal for paying back your creditors after you file for Chapter 13. Before it is accepted and you can start making payments, it must be approved by the bankruptcy court. 

When you submit the plan to the bankruptcy court, the trustee will look over it and determine if it is based on your best effort. In other words, they will determine if you're paying as much as you can towards your debts.

How Is Your Best Effort Determined?

When you complete your bankruptcy documents for the court, you have to provide detailed information about your income. The form you must complete is known as Form 22c

In addition to providing information about your income, you also have to include an estimate of how long it will take to pay off your debts and the amount of disposable income you expect to have.  Disposable income is what you have left after you pay your bills each month. 

The trustee will review the form and determine if you have fairly listed what you can pay each month on your debts. How much the trustee feels you have to pay is based on your state's median income. 

How Does Median Income Impact Best Effort?

If your annual income falls below the state's median income, the disposable income portion of Form 22c does not need to be completed. If you are below the state's median income, the assumption is that you have little to no disposable income. As a result, whatever you submitted in the repayment plan more than likely is your best effort. 

However, if your income is above the state's median income, your disposable income will be closely evaluated. If the trustee thinks that you can put more of your disposable income towards your debts, he or she will reject your plan and require you to submit a new plan with a higher repayment amount. 

Problems with determining your best effort can delay the finalization of your Chapter 13 bankruptcy. To avoid difficulties, work with a chapter 13 bankruptcy lawyer to ensure that you meet all of the requirements.