How to Calculate a Chapter 13 Monthly Payment
In Chapter 13 bankruptcy, you must propose a repayment plan. Here's how it's calculated.
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If you file for Chapter 13 bankruptcy, you'll have to propose a repayment plan. Through the repayment plan, which lasts either three or five years, you pay a set amount to the bankruptcy trustee each month. The trustee then uses that money to pay your creditors. Some creditors get paid in full through the plan, others (mostly unsecured creditors) get paid a portion of what you owe them. (To learn the basics of about Chapter 13 repayment plans, and which debts must be paid through them, see The Chapter 13 Bankruptcy Repayment Plan.)
Here's how to get a general idea of how much your plan payments will be.
Debts You Must Pay in Full Through Your Plan
Add up the following debts and divide by the number of months your plan will last.
Priority Debts. You'll have to pay your priority debts in full by the end of the repayment plan. These include most federal and state back taxes and back child support you owe to an ex-spouse or child.
Arrearages on Property You Want to Keep. If you are behind in your mortgage or car note, you'll have to make up the back payments (in full) through your repayment plan.
Secured Debt Payments on Property You Want to Keep
If you want to keep your home or car, you'll have to keep current on your mortgage and car loan payments. Sometimes you pay these through the plan. Other times you pay the lender directly. The same goes for other secured property. Add these monthly figues to your monthly payment for priority debts and arrearages.
In Chapter 13 bankruptcy, you pay your unsecured creditors an amount between 0 and 100% of what you owe them. The exact amount is depends on these rules:
(1) The minimum amount you must pay is equal to the amount your unsecured creditors would have received had you filed for Chapter 7 bankruptcy. This amount will depend, on large part, on how much of your property is exempt. (To learn more about exempt property see Bankruptcy Exemptions: What Do I Keep When I File for Bankruptcy?) If you don't have enough income each month to pay this minimum amount, your plan won't be confirmed.
(2) You also must devote all of your disposable income to your repayment plan. This might mean paying your unsecured creditors more than the amount they would have received had you filed for Chapter 7 bankruptcy. Bankruptcy law has set formulas for calculating your disposable income. To learn more, see Chapter 13 Bankruptcy Laws: Your Disposable Income.
Once you determine how much you will pay towards unsecured debts each month, add this to your previous monthly calculations.
Length of Your Repayment Plan
How long your plan will last depends on your current monthly income (which is actually your average monthly income in the six months prior to filing for bankruptcy). If that figure is less than your state's median income, your plan will be three years. If that figure is more than your state's median income, your plan will last five years. Use your plan length to figure out how much money you must devote each month towards the debts that must be repaid in full (i.e. priority debts and arrearages on secured property you want to keep).