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How Much Is My Chapter 13 Payment

By Cathy Moran

chapter 13 payment

Intrigued by Chapter 13, but worried about how much your Chapter 13 payment might be?

OK, let’s walk through what your payment must be by law and what you want that payment to cover to get a fresh start.

Part of the power of Chapter 13 is that you write the plan, with the help of your bankruptcy lawyer. Forget all the internet trash that says the court decides how much you can pay. The real role of the court is to decide if the plan you propose meets the legal minimums.

Three measures of Chapter 13 payment

Your proposed Chapter 13 plan is subject to three tests found in the law. Does it

  1. pay in all of your means test disposable income
  2. give unsecured creditors at least what they would have gotten in a Chapter 7
  3. satisfy in full priority claims for taxes and family support

That’s what the plan must do.

For number 1, “best efforts test”, you total up what your monthly disposable income is (according to the means test) and multiply by the number of months required for the plan.

For number 2, the “best interests of creditors” test, you calculate what a trustee would have to distribute to unsecured creditors in a hypothetical Chapter 7.

For number 3, the statutory test, you calculate the total of claims with a statutory priority.

Your plan must provide creditors with the largest of those three numbers.

Additional debts you want to pay

But you may want to pay other debts through the plan, as well. Your car, for example. Or mortgage arrears? Or a cosigned debt.

So you add the total needed to pay those debts to the number that you got from the calculations we just did.

Add the administrative expenses

The plan “pot” swells a little more before you have the final plan payment number. The Chapter 13 trustee gets paid for the work the trustee does from a commission calculated as a percentage of money flowing through the plan. The percentage changes periodically, but is capped by law at 10%.

Finally, if you didn’t pay your lawyer in full before you filed, your attorney’s fees can be paid through the plan as well.

Chapter 13 plan payments in the real world

In practice, it’s often hard to lock the plan payment down at the beginning of the case. Priority claims may come in at a number different than the one you used. The trustee’s commission may change. And if the highest number of three confirmation tests is your disposable income, that might change over the course of the case.

But the important thing is that you are not exposing yourself to the decision of a judge or trustee about what you must pay. There’s a formula; you can estimate what you’ll pay.

And you’ll often be surprised to find that what you need to pay is markedly lower than what you’re paying now.

More

Why I love Chapter 13

Stay in Control with Chapter 13

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Filed Under: Chapter 13, How bankruptcy works

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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