In a Chapter 13 case, the individual files a plan of reorganization, in addition to filing a petition and schedules. The Chapter 13 plan is one which you propose in accordance with the guidelines provided by the Bankruptcy Code. The plan is typically filed at the same time as your petition for Chapter 13 relief is filed; it will call for making monthly payments to a Chapter 13 Trustee and will last 3 to 5 years. Upon successful completion of the plan, you will be granted a discharge of all your dischargeable debts.
To qualify for Chapter 13, you must have income which is sufficiently regular to enable you to make payments under a Chapter 13 plan. There are two primary factors which determine the amount of the payment which you will be required to pay over the duration of your Chapter 13 plan. One of these factors is referred to as the “Disposable Income Test” and the other factor as the “Chapter 7 Test.” Of these two tests, the one that provides for the higher amount to be paid to your unsecured creditors is the one that will be controlling.
The first factor involves your Disposable Income — that portion of your monthly take-home income which is left over after subtracting out routine monthly expenses. The second factor is the Chapter 7 test. Under the Chapter 7 test, one must look to the amount of money which a Chapter 7 Interim Trustee could have attained assuming that your Chapter 13 case had been filed as a Chapter 7 case. Although a Chapter 13 case does not require that assets be sold, the value of your property is looked to as one factor to determine the amount that you will need to repay over the period of your Chapter 13 plan. Thus, if a Chapter 7 Interim Trustee could have obtained $3,000.00 for selling some of your unprotected assets, then the minimum that would be required to be paid to unsecured creditors in a Chapter 13 case is also $3,000.00.