Your Chapter 13 payment is built from your budget, not picked out of thin air. The plan must pay certain debts in full, such as most recent taxes and any mortgage or car payments you are catching up on. It must also give unsecured creditors at least your projected disposable income, which is your income minus allowed living expenses (11 U.S.C. 1325(b)). It must pay them at least what they would have received in a Chapter 7 case (11 U.S.C. 1325(a)(4)), plus the trustee’s fee. Plans last three or five years depending on whether your income is below or above the Florida median for your household size (11 U.S.C. 1322(d)).
For many people considering Chapter 13, the biggest question is simple: what will my monthly payment be? It is a fair question, because the payment shapes your budget for the next several years. The answer depends on your income, your expenses, what you owe, and what you own. This article walks through each piece of the calculation in plain language so you know what to expect before your consultation.
In Chapter 13 bankruptcy, you make one monthly payment to a Chapter 13 trustee, who distributes the money to your creditors under a court approved plan. That single payment is made up of several parts.
On top of these amounts, the Chapter 13 trustee receives a percentage fee for administering the plan, which by law cannot exceed 10 percent of plan payments (28 U.S.C. 586(e)).
The calculation starts with your current monthly income, which is generally your average income over the six months before filing (11 U.S.C. 101(10A)). That figure is compared to the median income for a household of your size in Florida. The U.S. Trustee Program publishes these median figures and updates them periodically.
This comparison is the same one used in the Chapter 7 means test, which our guide on qualifying for Chapter 7 in Florida explains in detail.
If the trustee or a creditor objects, a Chapter 13 plan must commit all of your projected disposable income to unsecured creditors for the length of the plan (11 U.S.C. 1325(b)(1)(B)). Disposable income is your current monthly income minus amounts reasonably necessary for the support of you and your dependents (11 U.S.C. 1325(b)(2)).
How those expenses are measured depends on your income. If you are above median, many expenses are set using national and local standards drawn from the means test formula (11 U.S.C. 1325(b)(3)). If you are below median, your actual reasonable expenses from your budget are generally used. Either way, typical living costs such as housing, food, transportation, utilities, and insurance are part of the picture.
There is a second floor your plan must meet. Unsecured creditors must receive at least as much as they would have received if your assets had been sold in a Chapter 7 case (11 U.S.C. 1325(a)(4)). Property protected by Florida exemptions, such as a qualifying homestead or retirement accounts, generally does not count toward this amount. But if you own significant nonexempt property, such as extra cash, a second vehicle, or valuable items above exemption limits, your plan payment may need to be higher to account for it.
Secured debts are often the largest part of the payment.
Your attorney combines these pieces into a plan payment that satisfies every legal test while fitting the budget you will actually live on. The payment must cover the priority debts, the secured debts you are keeping, the trustee’s fee, and at least the required amount for unsecured creditors. Payments usually begin within 30 days after you file, even before the plan is confirmed (11 U.S.C. 1326(a)(1)).
In some cases, the payment is deducted directly from your paycheck through a wage order. Our guide on whether filing bankruptcy affects your job explains what that means at work.
Life rarely stays the same for five years. If your income drops, you face a medical issue, or another hardship hits, a confirmed plan can be modified to change the payment (11 U.S.C. 1329). If your income rises significantly, the trustee may also seek a modification. Telling your attorney early about changes gives you the best chance of keeping the plan on track.
Chapter 13 can be a powerful way to save a home, catch up on a car loan, or deal with tax debt over time. Whether it is the better fit compared with Chapter 7 bankruptcy depends on your income, your property, and your goals. Our guide on how Chapter 7 and Chapter 13 cases differ compares the two side by side.
Your Chapter 13 payment should be one you can live with. The attorneys at Parker & DuFresne have helped Northeast Florida families build workable repayment plans since 1994. Call 904-606-9069 for a free consultation.
The payment must cover priority debts such as recent taxes, any secured debts you are paying through the plan, the trustee’s fee, and at least the minimum required for unsecured creditors. That minimum is based on your projected disposable income (11 U.S.C. 1325(b)) and the Chapter 7 liquidation test (11 U.S.C. 1325(a)(4)).
There is no single minimum dollar amount set by law. The payment has to be large enough to meet every legal requirement for your case, so it varies widely depending on income, debts, and property.
Generally three years if your income is below the Florida median for your household size, and five years if it is above (11 U.S.C. 1322(d)). A below median plan can be extended up to five years for cause.
It is your current monthly income minus amounts reasonably necessary to support you and your dependents (11 U.S.C. 1325(b)(2)). For above median filers, many expenses are measured using standards from the means test formula (11 U.S.C. 1325(b)(3)).
Usually not. Credit cards are unsecured debts, and many Chapter 13 plans pay them only a portion of the balance. Whatever remains on qualifying unsecured debts is generally discharged when the plan is completed.
The trustee receives a percentage fee for administering the plan. By law, that fee cannot exceed 10 percent of plan payments (28 U.S.C. 586(e)). The actual percentage is set for each trustee and can change over time.
Payments usually begin within 30 days after you file, even before the court confirms the plan (11 U.S.C. 1326(a)(1)).
Yes. A confirmed plan can be modified if your circumstances change, such as a drop in income or a new hardship (11 U.S.C. 1329). The trustee may also seek a change if your income rises significantly.
It can. Missed mortgage payments you want to catch up on are paid through the plan (11 U.S.C. 1322(b)(5)). Home equity protected by Florida’s homestead exemption generally does not raise the payment under the liquidation test.
Sometimes. Above median plans generally must run five years unless unsecured creditors are paid in full (11 U.S.C. 1325(b)(4)). Whether early payoff makes sense depends on your plan terms and is worth discussing with your attorney.
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