Awards & Media Appearances
What is Disposable Income?
Disposable income is the amount of money you have left over after paying for essential living expenses, such as food, housing, utilities, transportation, and other necessary costs. It’s what you have available to pay toward your debts once all your basic needs are covered. The importance of disposable income in a Chapter 13 bankruptcy case cannot be overstated because it helps determine how much you will need to pay your creditors over the life of the repayment plan. When you file for Chapter 13 bankruptcy, the court will require you to submit a repayment plan, which details how you plan to repay your debts over a period of three to five years. Your disposable income plays a crucial role in determining the amount you will pay each month and, ultimately, how long the repayment plan will last.The Chapter 13 Repayment Plan
A Chapter 13 bankruptcy repayment plan is designed to help you get back on track financially by repaying a portion of your debts over a set period. The repayment plan is based on your disposable income, and it’s created to ensure that your creditors get as much as possible over the plan’s duration. Typically, your payments will last between three and five years, depending on your financial situation. When determining your monthly payment, the court will consider your disposable income. For example, if you have a high amount of disposable income, your repayment plan will require higher monthly payments. However, if you have a low amount of disposable income, the monthly payments will be lower. This is why it’s so important to accurately calculate your disposable income.The Zendeh Del & Associates, PLLC Team
How Disposable Income is Calculated
In Texas, the calculation of disposable income begins with the debtor’s income. The court will review your income over the past six months, taking into account wages, bonuses, business income, and any other sources of regular income. From there, essential living expenses, including things like mortgage payments, car payments, utilities, and other necessary expenditures, are subtracted from your income. The remaining balance is your disposable income. The more money you have after paying for necessary expenses, the higher your disposable income, and the more you’ll have to pay toward your debts. If your disposable income is very low or even negative, the court may reduce your payments to fit within what you can afford.Client
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