Introduction
The repayment plan is the foundation of every Chapter 13 bankruptcy case. It determines how much the debtor pays each month, how long payments continue, and how much creditors receive.
Understanding how Chapter 13 plans are calculated helps debtors prepare for the process and set realistic expectations about their obligations during the bankruptcy case.
How Plan Payments Are Calculated
Chapter 13 plan payments are based on several factors.
Disposable Income
The starting point is disposable income — the amount remaining after allowed living expenses are deducted from gross income.
The bankruptcy court uses standardized expense categories based on IRS guidelines and local standards. These include:
- housing costs (mortgage or rent, utilities, maintenance)
- transportation (car payment, insurance, fuel, maintenance)
- food and household supplies
- healthcare and insurance
- taxes and payroll deductions
- childcare and education
- other necessary expenses
The amount remaining after these deductions is the disposable income available for plan payments.
The Means Test
For debtors with income above the Texas median, the means test determines which expenses are allowed and calculates the required plan payment using standardized formulas.
Below-median debtors have more flexibility in calculating plan payments.
Plan Duration
Plan length depends on income relative to the state median.
Below Median Income
Debtors with household income below the Texas median may propose a plan as short as 36 months. They may also choose a longer plan up to 60 months if needed.
Above Median Income
Debtors with household income above the Texas median must commit to a 60-month plan in most cases.
The 2026 Texas median income thresholds vary by household size and are updated periodically.
What the Plan Pays
A Chapter 13 plan typically distributes payments among several categories.
Priority Claims (Paid in Full)
- recent IRS and state tax obligations
- domestic support obligations (child support, alimony)
- attorney fees
Secured Claims
- mortgage arrears
- car loan payments (potentially at cramdown value)
- other secured obligations
Unsecured Claims (Partial Payment)
- credit card debt
- medical bills
- personal loans
- deficiency balances
Unsecured creditors often receive only a percentage of what they are owed — sometimes as little as zero percent if no disposable income remains after priority and secured claims are funded.
Real Client Scenario
A client with $60,000 in unsecured debt and a mortgage in forbearance with a balloon payment approaching needed to restructure multiple obligations simultaneously. The client had recently secured new employment providing stable income.
Chapter 13 allowed the client to:
- cure the mortgage arrears through the plan
- restructure vehicle loan payments
- address unsecured debts at a fraction of the balance
- consolidate everything into a single monthly payment
What Happens During the Plan
During the 3–5 year plan period:
- the debtor makes a single monthly payment to the trustee
- the trustee distributes funds to creditors
- normal mortgage and car payments continue outside the plan (unless included)
- creditors cannot pursue collection activity
- the debtor must maintain insurance and stay current on plan payments
Changes During the Plan
Life circumstances can change during a multi-year plan. Options include:
- Plan modification — payments may be adjusted if income changes
- Conversion to Chapter 7 — if the debtor can no longer maintain payments
- Hardship discharge — available in limited circumstances when plan completion becomes impossible through no fault of the debtor
What Happens When the Plan Ends
Upon successful completion of all plan payments:
- remaining qualifying unsecured debts are discharged
- secured obligations that were paid through the plan are resolved
- the debtor receives a discharge order from the court
This discharge eliminates the debtor's personal liability for the discharged debts.
Common Questions
Can my plan payment change?
Yes. If income increases or decreases significantly, the plan may be modified.
What if I miss a payment?
Missing payments can result in a motion to dismiss. However, the court often allows debtors to catch up before dismissing the case.
Do I pay creditors directly during Chapter 13?
In most cases, the trustee handles all payments. However, ongoing mortgage payments are sometimes made directly by the debtor.
Conclusion
The Chapter 13 repayment plan creates a structured, court-supervised framework for resolving debts over time. Understanding how payments are calculated, what the plan covers, and what options exist if circumstances change helps debtors navigate the process with realistic expectations and a clear path toward financial recovery.