Starting October 1, 2020, Alabama and North Carolina bankruptcy debtors will begin using new administrative expense multipliers in Chapter 7 and Chapter 13 bankruptcy.
The administrative expense multipliers used to qualify for Chapter 7 bankruptcy and establish Chapter 13 payment plan amounts have changed. Debtors in Alabama and North Carolina will use the new figures in all cases filed after October 1, 2020.
The administrative expense multiplier changes effective October 1, 2020, are as follows:
You can find the new figures on the U.S. Courts Administrative Expense Multipliers webpage.
A "multiplier" is the percentage a bankruptcy administrator charges to handle the estate. (A bankruptcy administrator is the equivalent of a bankruptcy trustee in Alabama and North Carolina.) The bankruptcy administrator applies the current multiplier to the Chapter 13 plan payment funds paid to creditors to determine how much the bankruptcy administrator is entitled to receive.
The portion paid to the bankruptcy administrator can significantly increase the repayment plan's overall cost, thereby impacting the debtor's ability to propose a feasible Chapter 13 repayment plan. For instance, although a multiplier of 7% will add only $17.50 to a $250 monthly plan payment ($267.50 per month total), it will increase a $2,500 monthly plan payment by $175 ($2,675 per month total). In Chapter 13, the administrative expense multiplier is inserted on line 36 of Form 122C-2 Chapter 13 Calculation of Your Disposable Income.
The multiplier can also determine whether a filer qualifies for Chapter 7 or whether the debtor must use Chapter 13. For instance, a Chapter 7 debtor whose gross income exceeds the median in that filer's state can deduct expenses to determine whether the filer has enough disposable income to pay into a Chapter 13 plan. In Chapter 7, the administrative expense multiplier is subtracted from the filer's gross income on line 36 of Form 122A-2 Chapter 7 Means Test Calculation.
Learn more about how bankruptcy administrators and trustees are paid for managing your bankruptcy case.
Effective date: October 1, 2020