Chapter 13 Bankruptcy Laws

Payments required under Chapter 13 bankruptcy laws for plan confirmation

Payments under new Chapter 13 bankruptcy laws (after October 17, 2005) represent a substantial increase over previous versions of the Code. In particular, new Chapter 13 bankruptcy laws prevent Judges from evaluating need based the previous "reasonable and necessary" standard. According to new chapter 13 bankruptcy laws, monthly living expenses are limited to the "National Standards Living Allowance" published by the IRS for use when prosecuting the crime of tax evasion.

What if this couple filed Chapter 13 under new bankruptcy laws?

For example, a couple who each earn minimum wage are entitled to claim $717 in monthly living expenses plus actual housing costs before filing. No exceptions, regardless of need, reasonableness, necessity, illness or disability. If paying $459 in housing cost, the maximum allowable living expenses equals $1,175. Subtract this amount from combined income ($1,800 - $1,175) to find "disposable income" is presumed to equal $625. Chapter 13 bankruptcy law requires all disposable income to be paid to a trustee for 5 years, under monthly supervision.