How Much Will My Chapter 13 Payment Be?

One of the most common questions asked, and the most important to many who file Chapter 13 bankruptcy is, "how much will the payment be?". The answer is not as simple as it would seem. Under the Bankruptcy Code, a debtor must devote his or her projected "disposable income" over the three or five year payment plan. In order to make this determination, the Court looks to a calculation based on the debtor's household's income and expenses. First, a debtor lists all of his or her household's income, based on all income sources, including wages, investment income, pension income, rent, etc. Next, the debtor lists all of his or her reasonable expenses, including food, mortgage payments or rent, gas, electricity, insurance, and other expenses. These expenses must be reasonable and verifiable. Many expenses, such as luxury vehicles, private school, and savings contributions must be cut. Once these expenses are subtracted from the income, the remaining money is dedicated to the Chapter 13 Plan. The Court may also look to a complicated "means test" that is filed by the debtor, to determine the amount a debtor must pay.

If a debtor files Chapter 13 to pay arrears on secured debts, the full arrearage must be paid back to the lender, regardless of whether this amount would make the payment higher than what the income and expenses say the debtor can afford. There are also fees and trustee commissions that must be paid in the Chapter 13 Plan. Unsecured creditors should also get some distribution, even if it is minimal.

A good lawyer knows how the income and expenses should be stated to make sure the debtor has a Chapter 13 payment that is feasible. Many times when a person files on their own (also know as "pro se") they do not do a good accounting of expenses, which results in an excessively high plan payment. An experienced attorney knows where to look and what questions to ask to make sure legitimate expenses are not missed.

Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.