Chapter 13: A Real Payment Plan Example with Numbers

If you are thinking about Chapter 13 bankruptcy, you probably have one big question: how much will I have to pay each month? That number can feel like a mystery. You hear about a "repayment plan," but no one tells you what it actually looks like in real life.

This article will walk you through a real Chapter 13 payment plan example with numbers. You will see how the monthly payment is figured out, where the money goes, and what affects the final amount. By the end, you should feel a lot less in the dark.

The Short Answer

In Chapter 13, your monthly payment is based on your income, your reasonable living expenses, and the kinds of debt you owe. You pay a set amount to a court-appointed trustee each month for three to five years. The trustee then spreads that money out to your creditors based on rules in the law.

There is no single "average" payment because every household is different. But once we look at your real numbers, we can usually estimate your payment pretty closely. Let's walk through an example so you can see how it works.

How a Chapter 13 Payment Is Built

Your Chapter 13 monthly payment is not just a random figure. It is built from a few key pieces:

• Your income. This includes wages, self-employment income, and most other money coming in.
• Your living expenses. These are the reasonable costs of living, like housing, food, transportation, and medical care.
• Your "disposable income." This is the money left over after your allowed expenses. The law says most of this should go to your plan.
• Special debts. Some debts, like past-due mortgage payments, car loans, and certain taxes, must be handled inside the plan.

When you put these pieces together, you get your monthly payment. To learn more about how the process works overall, see our page on Chapter 13 bankruptcy.

A Real Chapter 13 Payment Plan Example

Let's meet a fictional family to keep this simple. We'll call them the Smiths. These numbers are made up to show how a plan works. Your numbers will be different.

The Smith household:

• Married couple, two kids
• Take-home pay: $5,200 per month
• Behind on their mortgage by $6,000
• One car loan they want to keep
• $30,000 in credit card and medical debt

Step 1: Add up income

The Smiths bring home $5,200 per month after taxes.

Step 2: Subtract reasonable living expenses

Here is a simple look at their monthly expenses:

Step 3: Find the disposable income

Income minus expenses:

$5,200 − $4,350 = $850 per month

This $850 is the money the Smiths can put toward their Chapter 13 plan each month.

Step 4: Build the plan

Now we add in the debts that must be caught up. The Smiths are $6,000 behind on their mortgage. They need to spread that over their plan. They also have $30,000 in credit cards and medical bills, which are unsecured debts.

Over a 60-month plan, here is roughly where their $850 monthly payment might go:

At the end of five years, the Smiths are caught up on their mortgage, their car is paid off, and any remaining unsecured debt that was not paid is usually wiped out. That last part is called a discharge.

How "Disposable Income" Affects Your Payment

Your Chapter 13 disposable income is one of the biggest factors in your monthly payment. The more income you have left over after reasonable expenses, the more you usually must pay.

The law says your expenses must be "reasonably necessary." That means things like housing, food, transportation, and medical care. It does not include luxury spending.

For example, courts in North Carolina have ruled that taking out a new loan to pay for an adult child's college is not a necessary expense in a Chapter 13 plan. The plan is meant to cover your basic needs, not every want.

If your income is higher than the state median, you may also have to follow the "means test." This test uses national expense standards set by the IRS. Those standards change every year, so it is important to check the current numbers. Higher-income filers must usually stay in a five-year plan.

What North Carolina Filers Should Know

North Carolina is a strong Chapter 13 state. In fact, the Middle District of North Carolina has one of the highest Chapter 13 filing rates in the country. North Carolina also has an above-average success rate for completing these plans.

A few North Carolina points to keep in mind:

• Plan length. Lower-income filers may have a three-year plan. Higher-income filers usually must commit to five years.
• Saving your home. Chapter 13 is a powerful tool to catch up on a past-due mortgage. If you are facing foreclosure, our page on how to stop foreclosure explains more.
• Good faith matters. Even if your math works on paper, the court still wants to see that your plan is fair and honest. A plan that keeps fancy assets while paying creditors almost nothing can be denied.
• State exemptions. North Carolina has its own rules for protecting property. These rules affect what you keep and can affect your plan.

Chapter 7 vs. Chapter 13: How Payments Differ

Many people wonder whether Chapter 7 or Chapter 13 fits them better. The biggest difference is the monthly payment.

In a Chapter 7 case, there is usually no repayment plan at all. To compare the two side by side, visit our Chapter 7 vs. Chapter 13 page or learn more about Chapter 7 bankruptcy.

What Should You Do Next?

If you are trying to figure out your own Chapter 13 monthly payment, here are calm, simple steps:

1. Gather your income. Look at your take-home pay for the last six months.
2. List your real expenses. Write down what you actually spend on needs each month.
3. List your debts. Note which debts you want to keep paying, like a home or car.
4. Talk to an attorney. A bankruptcy attorney can run your real numbers and give you a clear estimate.

Not sure if bankruptcy is right for you at all? Our Do I Need Bankruptcy? page is a good place to start.

How Duncan Law Can Help

If you are dealing with debt in North Carolina, you do not have to figure this out alone. Duncan Law can review your income, your expenses, and your debts to help you understand what your Chapter 13 payment might look like. We can also help you decide whether Chapter 7 or Chapter 13 makes more sense for you.

You can schedule your free consultation online or call the office nearest you:

• Greensboro: (336) 856-1234
• Charlotte: (704) 563-1224
• Winston-Salem: (336) 245-4294
• Asheville: (828) 348-5252
• High Point: (336) 294-5800
• Salisbury: (704) 297-4000

Duncan Law serves clients throughout North Carolina, including Greensboro, Charlotte, Winston-Salem, Asheville, High Point, Salisbury, and the surrounding communities.