If your household income exceeds the median income for your household size and location, you will need to file under chapter 13 in most cases. There are some rare exceptions which I won’t discuss in this article.

Your monthly chapter 13 plan payment amount is based on your disposable income as calculated using the Chapter 13 Means Test Official Forms. Your household income is calculated from your average income from the last 6 months. If your average income exceeds the median income, you must complete the long form of the means test using Form 122A-2 (“part 2” of the means test).  Part 2 takes your gross income and subtracts all payroll deductions (taxes, health care, 401K, life insurance, FSA, etc) and all living expenses for your household size. Some living expenses are based on IRS local standards for things like fuel, groceries, utilities, and rent. Other expenses are based on your actual cost including mortgage payment, childcare, payroll deductions, and auto loans.

If your disposable income is calculated to be $400/month, you would pay $400 x 60 months for a total of $24,000 to unsecured creditors. If this is not enough to pay-off all your debts, the unpaid balances will be discharged without payment so long as you complete the payment plan.

Your disposable income as calculated on the means test is not based on your actual disposable income because you may spend more or less than the IRS local standards for expenses such as groceries, utilities, fuel, etc.

You can keep your auto loans and mortgage current outside the plan. All your unsecured creditors will receive a notice of bankruptcy that provides a deadline to file a claim with the court. The deadline is 90 days after you file. if the creditor fails to file a claim before the deadline, their claim is discharged without being paid. It is common for a few creditors to never file a claim in a chapter 13 case. Therefore, your chapter 13 payment will likely decrease after three months.