Mortgage defaults will be paid 100% if you want to keep your house.

Other secured debt defaults will be paid 100% if you want to keep the property. Missed car payments fall into this category.

Unsecured debts will be paid anywhere from 0% to 100% of what you owe. The exact amount depends on:

• the total value of your nonexempt property
• the amount of disposable income you have each month to put toward your debts, and
• how long your plan lasts.

Your plan must commit to paying any leftover disposable income (your income less certain allowed expenses and payments on secured loans, such as a mortgage or car loan) towards your unsecured debts, such as credit card debts and medical bills.

No Surrender of Property

In Chapter 7 bankruptcy, you must surrender your nonexempt property to the trustee, who will sell it and distribute the proceeds to your creditors. If you file for Chapter 13 bankruptcy, however, you don't have to hand over any of your nonexempt property; instead, you repay your debts out of your income. In exchange for getting to keep your property, your plan will have to pay your creditors at least the value of your nonexempt property.

Length of Payment Plan

The length of your plan depends on your income level. If your "current monthly income" (your average income over the six months prior to filing) exceeds the median monthly income for a family of your size in your state, your plan must last five years. If your income is less than the median, you can propose a three-year plan, even if your unsecured creditors cannot be fully repaid during that time. (To find the median income figures for your state, go to the United States Trustee's website, http://www.usdoj.gov/ust, and click "Means Testing Information.")

Your "current" monthly income might be out of date. Because your current monthly income, as calculated above, is an average, it may well be more than your actual monthly income at the time you file. For instance, if you were laid off unexpectedly three months before filing, your monthly income when you file may be quite low -- as compared to your average income over the last six months, which will have to include three months of your salary.