Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

How Much Do You Need to Be Able to Pay in Chapter 13?

It’s one of the most important questions debtors can ask, particularly if their incomes are above the median for their state and they don’t expect to pass the means test. There are three tests the Bankruptcy Code applies to debtors’ repayment plans before they can be confirmed. A plan must pass all three tests and the one with the highest dollar figure will be the amount a debtor will repay. Although they appear in Section 1325, they aren’t grouped together, and what follows are descriptions, not formal names.

(1)  The priority claims test. A repayment plan must pay all priority claims in full. If priority claims are the bulk of a debtor’s debts, then this test will show how much they will need to pay.

(2)  The best interests of the creditors test. The plan must distribute as much or more to the creditors as if the debtor had filed a chapter 7 bankruptcy.

(3)  The best efforts test. If the debtor’s (non-priority) debts cannot be completely repaid during the plan, then the debtor must promise to dedicate all of his or her “disposable income” under the plan. Practically speaking, in New York, debtors who do not promise to pay something to their unsecured creditors will fail this test. Elsewhere trustees are more lenient. Debtors proposing 100 percent repayment plans will need to pass this test easily.

Although these tests are fairly straightforward, it’s very important to reiterate that the value from the highest one determines the size of the payments. Passing the best interests of the creditors test is probably the most obviously straightforward as no creditor or the trustee would accept anything less than what they could get in chapter 7. Likewise, debtors with large priority claims will look to those as the upper limit to what they can propose. Finally, so long as the other two tests are met, debtors who still cannot pay all of his or her unsecured debts, can promise all of their disposable income to remain in chapter 13.

Because chapter 13 requires a closer look at the character of the debtor’s obligations, it’s crucial to plan it with an experienced New York bankruptcy lawyer.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top