What is disposable income in Chapter 13?
Disposable income is your current monthly income minus amounts reasonably necessary for your support and that of your dependants. Under 11 U.S.C. Section 1325(b), all of your projected disposable income over the applicable commitment period must be paid to unsecured creditors through the plan.
How is the Chapter 13 commitment period determined?
If your annual income is below your state median for your household size, the commitment period is 3 years. If it is above the state median, you must commit to a 5-year plan. You can pay off the plan early only if unsecured creditors are paid in full.
How are allowed expenses calculated for above-median debtors?
Above-median debtors do not use their actual budget. Instead, allowed expenses come from the IRS National and Local Standards for food, housing, transportation, and other categories, completed on Form 122C-2 (the Chapter 13 Means Test calculation).
What is the difference between Chapter 13 disposable income and the Chapter 7 means test?
The Chapter 7 means test decides eligibility to wipe out debt. The Chapter 13 disposable income calculation decides how much you must repay over your plan. Both use IRS expense standards, but Chapter 13 focuses on the required plan payment rather than a pass or fail result.