Browse terms
Chapter 13 plans
Disposable income
In bankruptcy, disposable income is income that is not reasonably necessary for the maintenance or support of the debtor or the debtor's dependents and certain other limited purposes. 1
Talk to a lawyerHow is disposable income calculated in Chapter 13?
In Chapter 13 the calculation starts with current monthly income, leaving out child support, foster care and certain disability payments received for a child. From that come the amounts reasonably necessary for the support of the debtor and dependents, for domestic support obligations that come due after filing, for charitable contributions within a limit and, for a debtor in business, for necessary business expenses. 1
For a debtor whose income is above the state median, the necessary expenses are set using the means test expense rules. 2
The figure drives what unsecured creditors receive. A plan does not have to pay unsecured claims in full, as long as the debtor pays all projected disposable income over the applicable commitment period and unsecured creditors get at least what they would get in a Chapter 7 liquidation. 3
That period is generally three years when current monthly income is below the state median and five years when it is above. 3
Which forms work it out?
| Form | What it does |
|---|---|
| Form 122C-1 4 | Reports current monthly income, compares it with the state median for the household size and sets the applicable commitment period 4 |
| Form 122C-2 4 5 | Filed only when income is above the median. Calculates an amount the plan may be required to pay toward unsecured debts 4 5 |
Common questions
What happens if the trustee objects to my plan payment?
If the trustee or an unsecured creditor objects, the court may not approve the plan unless it pays that claim in full or commits all projected disposable income for the commitment period. 3
Sources
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