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What is disposable income for purposes of Chapter 13?
In determining how much you have available to pay your debts for
purposes of Chapter 13, the courts will apply living standards
specified under IRS National and Local standards to determine what is
reasonable to pay for food, clothing, rent, housekeeping, and so forth.
Whatever is left over from your net income after required payroll
deductions and allowable expenses after applying the means test
formula is disposable income. Put another way, it is the amount of
money you have at your disposal to be eligible to file a Chapter 13
repayment plan.
Social security benefits, payments to victims of war crimes or crimes
against against humanity, and payments to victims of terrorism (i.e.,
World Trade Center victims) are not counted. An issue sometimes arises
about whether income from non-employment sources, such as family and
friends, or income from seasonal work, should be counted. Issues
frequently arise about whether certain expenses should be counted in
determining disposable income. Resolving these issues generally
requires the advice of an experienced bankruptcy attorney.
(Reviewed 11.14.08)
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