The court calculates your Chapter 13 payment based on your income, expenses, and what you owe

Your Chapter 13 payment is not a fixed amount the trustee decides. It comes from a formula built into the bankruptcy code that looks at three things: how much money you actually take home each month, what the law says you need to spend on essentials, and how much is left over to pay creditors. The trustee uses official forms and tables to work through this calculation, and the result becomes your court-ordered monthly payment.

The payment you end up making depends heavily on whether your income is above or below the median income for your state and family size. That threshold determines which expenses the court will allow you to deduct, and which ones it will not. This is why two people with similar paychecks can end up with very different monthly obligations.

Key Takeaways

  • Your payment is calculated using your actual monthly income minus allowed living expenses, with the remainder going to creditors over three to five years.
  • If your income is below your state's median, you use actual expenses; if above median, you use IRS expense standards even if your real costs are lower.
  • The trustee files a proposed payment plan with the court, but you and your creditors can object before a judge confirms it.
  • Changes in income or major expenses can trigger a modification of your plan, which requires filing a motion with the court.
  • The calculation happens on official bankruptcy forms (Form 106 series) that are public record once filed.

Income: what counts and what does not

The trustee starts by adding up your gross household income for the six months before you file. This includes wages, self-employment income, rental income, Social Security, pension payments, and any other regular money coming in. Child support you receive counts; child support you pay counts as a deduction later. Irregular bonuses or tax refunds are averaged in only if they are truly regular.

Some income is excluded entirely. Means-tested benefits like SNAP or housing vouchers do not count. Gifts do not count unless they are so regular they look like income. The trustee divides the six-month total by six to get your average monthly income, which is what actually goes into the formula.

This six-month lookback is strict. If you lost a job three months ago, the income from that job still counts for the first three months of the calculation. If you just started a new job, it does not count yet. The trustee is looking at what you earned, not what you are earning now.

Allowed expenses: the split between below-median and above-median filers

Once income is set, the trustee subtracts living expenses. But which expenses are allowed depends on whether you are below or above your state's median income for a household your size.

Below-median filers deduct their actual expenses: what they really spend on rent, utilities, food, transportation, insurance, childcare, and debt payments. The trustee will ask for proof—lease agreements, utility bills, bank statements—but the number that matters is what you actually pay.

Above-median filers deduct IRS National Standards and Local Standards instead of actual expenses, even if they spend less. The IRS publishes these tables monthly. For example, the IRS might say a family of three in your area is allowed $1,200 for food, but if you actually spend $800, you still deduct $1,200. This is intentional: the code assumes above-median earners have more flexibility to cut spending.

Both groups deduct certain fixed obligations: child support paid, alimony, court-ordered restitution, and prior tax debt. Secured debt payments (car loans, mortgages) are deducted at their actual amount. Unsecured debt like credit cards is not deducted; that is what the plan is meant to pay.

The disposable income calculation and plan length

After expenses are subtracted from income, what remains is disposable income. This is the money the court believes you can afford to send to the trustee each month. The trustee multiplies this monthly amount by either 36 months (three years) or 60 months (five years) to get your total plan payment.

Plan length is determined by income. Below-median filers can propose a three-year plan. Above-median filers must commit to five years. There is no middle ground, and the trustee will object if you propose the wrong length.

The total amount you pay over the plan period does not have to equal what you owe. If your disposable income is low, unsecured creditors (credit cards, medical debt, personal loans) may receive only a small percentage of what they are owed. Secured creditors (mortgage and car lenders) and priority creditors (tax debt, child support arrears) are paid first; whatever is left goes to unsecured creditors on a pro-rata basis.

How the trustee files the plan and what happens next

Once the trustee completes the calculation, they file a proposed Chapter 13 plan with the bankruptcy court. This document shows your income, your allowed expenses, your disposable income, and the monthly payment amount. It is public record from the moment it is filed.

You, your creditors, and the trustee then have a chance to object. The most common objection is from you: if the trustee's calculation of your expenses is wrong, or if they have misunderstood your income, you file an objection and ask for a hearing. Creditors sometimes object if they believe the plan does not pay them enough, though this is rare and usually unsuccessful.

If no one objects, or after objections are resolved, the judge holds a confirmation hearing. This is usually brief. The judge confirms the plan, and you begin making payments to the trustee the following month. The trustee then distributes your payment to creditors according to the plan.

What happens if your income or expenses change

Your Chapter 13 plan is not permanent. If your income increases significantly, creditors can file a motion to increase your payment. If your income drops—you lose a job, your hours are cut, you have a medical emergency—you can file a motion to modify the plan downward.

The trustee also monitors your tax returns. You must file taxes every year while in the plan, and the trustee reviews them. If your actual income was higher than projected, the trustee may ask the court to increase your payment. If it was lower, you may be able to reduce it.

Major expenses also trigger modifications. If your car is totaled and you need to buy a replacement, or if a child ages out of childcare, you can ask the court to adjust your plan. The modification process requires filing a motion, and creditors can object, but courts generally allow modifications when circumstances genuinely change.

Common calculation mistakes and how to catch them

The trustee's calculation is often wrong in small ways. They may overestimate your utilities, underestimate your childcare costs, or fail to account for a debt payment you are still making. You should receive a copy of the proposed plan before the confirmation hearing and review it line by line against your actual income and expenses.

If you find an error, file an objection. Bring documentation: pay stubs, lease agreements, childcare invoices, insurance bills. The trustee will often agree to a correction without a hearing. If they do not, the judge will hear both sides at the confirmation hearing.

Another common issue: the trustee may not know about income that started after your six-month lookback period. If you took a new job two months before filing, that income does not count yet. But if you took it one month before filing, it does. Make sure the trustee has the right start date.

Frequently Asked Questions

Can I choose how long my plan lasts, or is it always three or five years?

It depends on your income. Below-median filers can propose three years. Above-median filers must do five years. You cannot choose a four-year plan or a six-year plan. The length is tied to the median income threshold for your state and family size, which the trustee calculates from your six-month average income.

What if my actual living expenses are much lower than the IRS standard?

If you are above median, it does not matter. The court uses the IRS standard anyway, and the difference goes to creditors. If you are below median, you deduct your actual expenses, so lower spending means a lower payment. This is why the median income threshold matters so much.

Does my student loan payment count as an expense I can deduct?

Student loans in repayment are deducted as an actual expense for both below-median and above-median filers. However, if you are above median, the trustee may argue that you should be on an income-driven repayment plan instead, which would lower your payment and increase your Chapter 13 payment. Bring documentation of your current repayment plan to the confirmation hearing.

What if the trustee's income calculation includes money I do not actually receive?

File an objection before the confirmation hearing. Bring pay stubs, tax returns, or other proof that the income figure is wrong. If the trustee included a bonus you did not receive, or income from a job you left, you can ask the judge to remove it. The trustee must prove the income was actually received, not just that it was offered.

Can my payment go down if I get a raise?

No. A raise increases your disposable income, which means creditors can file a motion to increase your payment, not decrease it. Your payment can only go down if your income drops, your expenses increase, or you complete the plan early and the remaining balance is discharged.