What is disposable income for purposes of Chapter 13?

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disposable income consumer bankruptcy

What is disposable income for purposes of Chapter 13?

In determining how much you have available to pay your debts for purposes of Chapter 13, the courts will apply living standards specified under IRS National and Local standards to determine what is reasonable to pay for food, clothing, rent, housekeeping, and so forth. Whatever is left over from your net income after required payroll deductions and allowable expenses after applying the means test formula is disposable income. Put another way, it is the amount of money you have at your disposal to be eligible to file a Chapter 13 repayment plan.

Social security benefits, payments to victims of war crimes or crimes against against humanity, and payments to victims of terrorism (i.e., World Trade Center victims) are not counted. An issue sometimes arises about whether income from non-employment sources, such as family and friends, or income from seasonal work, should be counted. Issues frequently arise about whether certain expenses should be counted in determining disposable income. Resolving these issues generally requires the advice of an experienced bankruptcy attorney.

(Reviewed 11.14.08)

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