Chapter 13 Plan Payments May Fluctuate

One of the complaints I hear from my Chapter 13 bankruptcy clients is about the tendency of Chapter 13 plan payments to change during their case. Changes in the plan payment amount happen for a lot of different reasons and they are a natural part of the process. When a Chapter 13 case is filed the debtor proposes a repayment plan to a trustee and the creditors listed in the schedules. To calculate the initial plan payment amount the debtor uses an estimate of how much he believes he owes to his creditors. This information may be found on a recent bill or his credit report. Estimates of claims are usually close but they are never exactly right because claims grow due to interest and fees. Sometimes the debtor hasn’t made payments in several months or years and the creditor has stopped sending bills. In these situations the estimate of the claim amount may be small compared to the actually claim amount. When debtors underestimate claim amounts their plan payment may increase.

Debtors also determine their ability to repay unsecured creditors by calculating their disposable income. Disposable income is calculated by subtracting allowed deductions from income using a means test. This calculation is subject to review by the trustee and the trustee may require that the debtor to support their deductions with documentation. If the documentation doesn’t support the deductions taken on the means test, the trustee may object to the deductions. If the deduction is not allowed then the debtor’s disposable income will increase which may result in an increase in the plan payment.

Plan payments also increase when the debtor’s income increases during the plan term. Debtors are required to provide updated income and expense information as their financial situation changes. When a debtor’s income increases or expenses drop the trustee will recalculate their ability to make payments to their creditors and sometimes this change in circumstance results in an increase in the plan payment amount.