Bankruptcy Chapter 13 - How much will my monthly payment be? (Part 3)

This is the third part of a blog series. In Part 1, I explained the first step in determining the amount of the monthly chapter 13 payment. In Part 2, I explained the second step is to determine what debts must be paid in full through the plan. The next step is to complete the Disposable Income analysis, which is referred to as the "Means" Test.  

The means test uses a series of calculations using some local, regional and national statistics along with some actual allowable deductions from the debtors' gross income to determine what the debtors "should be able to pay" each month. This is will set the minimum monthly payment.

Also, it sets duration of the payment plan. If the calculations show the debtor's income is above the median income for the local population, the payment plan will probably be for 60 months. If the calculation show's the debtor's income is below the median income, the plan can be as short as 36 months providing the 36 payments can pay the amount of debt discussed in parts 1 and 2 of this series.

After completing the means test calculations for Jane and John, for this case, we determined their income is over the median income for their region and family size and the should have $375.00 disposable income for the plan. The plan will need to be 60 months.  

The means test is a complex analysis and really difficult to explain in detail. If you compare the minimum amount that needs to be paid ($26,000.00 see part 2) to the minimum amount required above ($375.00), you will find it is not enough to pay off the full debt.

The next step is to determine actual disposable income. In upcoming parts of this series I will discuss actual disposable income, the trustee's commission, and try to wrap all this with an estimated payment.

If you want assistance, legal representation, or just want to know more about me, Mark M. Medvesky, or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.

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