Chapter 13 Payment Plans: How Monthly Payments Are Calculated

The Three Tests That Determine Your Payment

Your Chapter 13 payment isn't one formula — it's the highest output of three separate legal tests run in parallel. Test one: all projected disposable income under 11 U.S.C. § 1325(b). Test two: unsecured creditors must get at least as much as they'd have received in a Chapter 7 liquidation. Test three: priority claims and secured arrears paid in full. The plan payment is whichever test produces the biggest number — the trustee's 7–10% commission rides on top.

Here's the thing — these three tests serve different purposes and protect different interests. The disposable income test ensures you are contributing your fair share. The best-interest test protects creditors from receiving less than they would in a Chapter 7. And the full-payment test ensures that non-dischargeable obligations (taxes, child support) and cured secured debts (mortgage arrears) are fully satisfied. Our Chapter 13 Payment Plan Calculator runs all three tests simultaneously to show you the controlling amount.

The Disposable Income Test

The disposable income test, codified at 11 U.S.C. § 1325(b), requires that all of your "projected disposable income" be paid into the plan. Disposable income is defined as your current monthly income (CMI) minus reasonably necessary living expenses. The expense calculation mirrors the Chapter 7 means test, using IRS National and Local Standards for many categories. For a complete explanation of what counts as disposable income, see our article on disposable income in Chapter 13.

If your income is above the state median (using the same Census Bureau data as the Chapter 7 means test), your plan must last five years and your expenses are calculated using the IRS standards. If your income is below the median, your plan can be as short as three years and your actual expenses may be used instead of the IRS figures. This distinction can significantly affect both the plan length and the monthly payment amount.

The disposable income calculation also accounts for secured debt payments (mortgage, car loan), domestic support obligations (child support, alimony), and certain other required expenses. After subtracting all allowable expenses from your CMI, the remainder is your disposable income — the minimum you must pay into the plan each month. The trustee's commission (typically around 10%) is added on top of this amount.

The Best-Interest-of-Creditors Test

The best-interest test, found at 11 U.S.C. § 1325(a)(4), requires that unsecured creditors receive at least as much through your Chapter 13 plan as they would have received in a Chapter 7 liquidation. To calculate this, you determine the value of your non-exempt assets — the assets that a Chapter 7 trustee could sell and distribute to creditors.

For example, if you have $10,000 in non-exempt assets (perhaps a vehicle with equity above the exemption limit or a valuable collection), your Chapter 13 plan must pay unsecured creditors at least $10,000 over the life of the plan. If you have no non-exempt assets (as is the case in many consumer filings), this test is easily satisfied — unsecured creditors would receive nothing in a Chapter 7, so any payment through Chapter 13 exceeds that amount.

This test is particularly important for people who chose Chapter 13 specifically to protect non-exempt assets. You get to keep the property, but you must pay unsecured creditors its equivalent value through the plan. Use our Bankruptcy Exemption Calculator to determine your non-exempt asset value and see how it affects your Chapter 13 payment.

Priority and Secured Claims: The Full-Payment Requirement

Certain debts must be paid in full through the Chapter 13 plan, regardless of your disposable income or the best-interest test. Priority claims under 11 U.S.C. § 507 include domestic support obligations (child support and alimony arrears), most tax debts (income taxes from the past three years, payroll taxes, property taxes), and administrative expenses (including your attorney's fees if paid through the plan).

Secured debt arrears — past-due mortgage payments, past-due car loan payments — must also be cured in full through the plan if you intend to keep the collateral. If you are $15,000 behind on your mortgage and propose a five-year plan, that $15,000 must be spread over 60 months ($250/month) plus ongoing mortgage payments made directly to the lender. Car loan arrears are treated similarly.

For some debtors, the priority and secured claim requirements set the floor for the plan payment. A person with $20,000 in tax arrears and $12,000 in mortgage arrears must pay at least $32,000 over the plan period (before trustee fees), even if their disposable income is minimal. This is why estimating your plan payment requires knowing not just your income and expenses, but also the specific debts you owe. Our Chapter 13 Payment Plan Calculator accounts for all three payment determinants.

The Trustee's Commission and Administrative Costs

The Chapter 13 trustee receives a commission on all amounts distributed through the plan. The commission percentage varies by district but typically ranges from 7% to 10%. This isn't an additional fee you pay directly — it is built into the plan structure. If your plan pays $500 per month to creditors and the trustee takes 10%, your total monthly plan payment is approximately $555.

Attorney fees are another significant administrative cost. In many districts, Chapter 13 attorney fees are governed by local "no-look" fee guidelines that allow attorneys to charge a set amount (typically $3,000 to $5,500) without detailed fee applications. These fees are usually paid through the plan, reducing what is available for other creditors. If the attorney's work exceeds the no-look amount, they can petition the court for additional compensation.

The Chapter 13 filing fee is $313, payable at filing or in installments. Credit counseling and financial management course fees (approximately $25-$50 each) are additional costs. When budgeting for Chapter 13, account for all of these expenses — our Court Filing Fees tool has current filing fee information, and the Chapter 13 Payment Plan Calculator factors in the trustee commission when estimating your monthly payment.

Adjusting Your Plan: Modifications and Step Plans

Chapter 13 plans don't have to be a flat monthly payment for the entire term. Many plans use a "step-up" structure where payments are lower in the first year and increase later — for example, to accommodate a debtor who expects a raise or whose car loan will be paid off during the plan. Step plans are common and generally approved by courts as long as the plan satisfies all three tests by completion.

If your financial circumstances change during the plan — you lose your job, receive a raise, face unexpected medical expenses, or experience other changes — you can request a plan modification under 11 U.S.C. § 1329. Modifications can increase or decrease your payment, extend the plan length (up to the five-year maximum), or change how much each creditor receives. Both debtors and creditors can request modifications.

If you fall behind on plan payments, communicate with your attorney and the trustee immediately. A brief period of missed payments can often be addressed through a modification. Extended non-payment, however, may result in dismissal of your case — which terminates the automatic stay and returns you to your pre-bankruptcy position with all remaining debts intact. Proactive communication is essential to a successful Chapter 13 completion.

Putting It All Together: An Example Calculation

Consider a family of four in Ohio with a combined annual income of $90,000 (above the Ohio median). They owe $5,000 in past-due taxes, are $12,000 behind on their mortgage, have $40,000 in credit card debt, and own a car with $3,000 in non-exempt equity. Their IRS-standard-based disposable income is $800 per month.

The disposable income test requires $800/month for 60 months = $48,000. The best-interest test requires at least $3,000 to unsecured creditors (the non-exempt car equity). The full-payment test requires $5,000 (taxes) + $12,000 (mortgage arrears) = $17,000 in priority and secured claims. After adding the trustee commission (approximately 10%), the disposable income test controls at roughly $880/month. Of the $48,000 total distributed, $5,000 goes to taxes, $12,000 cures the mortgage, the trustee keeps roughly $4,800, and the remainder (about $26,200) goes to unsecured creditors — paying about 65% of the $40,000 in credit card debt.

The remaining credit card debt is discharged at plan completion. The family keeps their home, their car, and all their other property. The exact numbers depend on interest rates, attorney fees, and other factors — but this illustrates how the pieces fit together. For your own estimate, use our Chapter 13 Payment Plan Calculator.