Chapter 13 plan payments are based on your projected disposable income (“PDI”). PDI is projected take-home pay (or net business revenue after taxes) minus average projected monthly household expenses plus income tax refunds in excess of $1,500 per year. If you don’t owe any past-due priority claims (like certain taxes) or past-due secured claims (like the past-due installments on a home mortgage or a car loan), your plan payment is based on the money left over at the end of the month as shown on your bankruptcy income and expense schedules. Creditors then share in those payments according to the relative size of their claims. Creditors that are owed more receive more, proportionally.
If you do owe past-due priority claims, or past-due secured claims on property you wish to keep, your monthly chapter 13 plan payments must total enough to pay those claims in full over the life of the plan (either 36 months or 60 months). If your income falls short of the total needed to pay past-due priority claims or secured claims, the trustee will count contributions from third-parties who commit in writing to contribute toward the plan.
In either situation, your total chapter 13 plan payments must at least equal what creditors would have received if you had filed a chapter 7 (liquidation) case instead of a chapter 13 case. This is called the liquidation analysis. For many filers, the liquidation analysis doesn’t change the amount that they must pay over the life of the chapter 13 plan.