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Chapter 13: What is Disposable Income?

Chapter 13 bankruptcy is a legal process that provides individuals with the opportunity to reorganize their debts and create a manageable repayment plan. In this section, we will explore the key factors involved in Chapter 13 bankruptcy, including disposable income, liquidation, and plan length.

One important aspect of Chapter 13 bankruptcy is determining disposable income. Despite being a core component of Chapter 13 plans, the term disposable income is not specifically defined in the bankruptcy code.  Disposable income refers to the amount of money left over after necessary living expenses are deducted from your monthly income. An experienced bankruptcy attorney will be able to guide you through the process to determine what is a necessary expense and what can be deducted from your income and what is not an allowable expense despite the fact that the Debtor does in fact incur the expense. While the basic necessities are the same across the board, and standardized via the IRS standard expenses, each Debtor may have additional expenses whether they be medical, travel for employment, child care, etc that will need to be examined to arrive at your own individual disposable income calculation.

In most Chapter 13 cases the Trustee and the Debtor will differ on what the calculation of disposable income should be for that particular case or whether the expense is necessary and reasonable for the Debtor, it is important to have an experienced attorney on your side when facing off with the Trustee in front of the Court as these determinations regarding expenses and disposable income amount to thousands of dollars in either savings or expenditures over the life of a Chapter 13 case.

At the F&L Law Group, our attorneys have more than 32 years of combined experience handling Chapter 13 cases while also serving the Middle District of Florida Bankruptcy Court on Judicial Liaison Committees and Local Rules Lawyers’ Advisory Committees all in an effort to fight for our clients rights and protect their income to the fullest extent possible so that they may get the fresh start that they deserve.

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