How Much Do I Have to Pay the Chapter 13 Trustee?

by Brett Weiss, Esq.

March 14, 2009

Clients always ask how much their Chapter 13 Plan payment will be, and how much they will have to pay the Chapter 13 Trustee each month.

This isn’t an easy question to answer, since there are four different tests used to determine the number: the Means Test, the Chapter 7 Liquidation Test, the Disposable Income Test, and the Required Payment Test.

The Means Test is a formula imposed by Congress in the 2005 BAPCPA amendments, and the numbers used don’t necessarily have anything to do with reality. Basically, you average your household income for the past six months, multiply by 12, and compare that number with the median family income for a household of your size. If you’re under, the Means Test requires a $0 payment. If you’re over, you’re allowed certain deductions, which determine your payment.

The Chapter 7 Liquidation Test doesn’t mean that your assets will be liquidated, or sold. It simply means that you look at what a Chapter 7 Trustee could get if he/she were to sell all your non-exempt assets. For example, if you would have $60,000 in non-exempt equity after your house were sold (an increasingly rare event in this economy), you would have to pay your creditors at least $60,000 over the term of your Chapter 13 Plan. If, as is often the case, there are no non-exempt assets with equity, the Chapter 7 Liquidation Test requires a $0 payment.

The Disposable Income Test looks at your actual income and your actual and projected expenses. You take your net income (listed on Schedule I) and subtract your actual and projected expenses (listed on Schedule J). Since you are required to pay all of your disposable income into the Chapter 13 Plan, the number that results is the minimum Chapter 13 Plan payment (although some Chapter 13 Trustees will allow you to pay a bit less to provide for contingencies and emergencies).

The final test is the Required Payment Test. This test looks at the claims that must be paid in full through the Chapter 13 Plan (attorney’s fees, priority taxes and domestic support obligations), the amount of secured debt (typically mortgage and car) arrearages, the percentage payment to the general unsecured creditors, and the Chapter 13 Trustee’s commission, and adds these numbers up. The result is called the Plan Base: it is the number that must be paid through the Plan. Assuming that none of the other three tests require a different result, dividing this number by the number of months in the Plan gives you the monthly payment.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.

Last modified: December 28, 2011