Chapter 13 bankruptcy allows DC residents to reorganize their debts into a manageable repayment plan lasting three to five years. But the monthly payment amount is not arbitrary -- it is determined by a series of statutory tests that establish floors and ceilings for what you must pay.
Understanding how these calculations work is essential before you commit to a Chapter 13 plan.
The Three Tests That Determine Your Payment
Every Chapter 13 plan must satisfy three independent tests. Your plan payment is the highest amount required by any of the three:
- The Disposable Income Test (11 U.S.C. Section 1325(b))
- The Best Interest of Creditors Test (11 U.S.C. Section 1325(a)(4))
- The Secured and Priority Debt Test (practical requirement based on your specific debts)
If any one of these tests requires a higher payment than the others, that higher number controls.
Test One: Disposable Income
The disposable income test is the backbone of Chapter 13 payment calculations. Under Section 1325(b)(1)(B), if the trustee or an unsecured creditor objects to the plan, you must commit all of your projected disposable income to the plan for the applicable commitment period.
Disposable income is defined as your current monthly income minus amounts reasonably necessary for the maintenance or support of you and your dependents, and minus any amounts necessary for business expenditures if you are self-employed.
For above-median-income debtors, "amounts reasonably necessary" are determined using the means test formula from 11 U.S.C. Section 707(b)(2), not your actual expenses. This means test uses standardized IRS expense allowances for housing, transportation, food, and other categories, plus actual payments on secured debts.
For below-median-income debtors, the court looks at your actual expenses to determine what is reasonably necessary.
The Means Test and DC Median Income
The means test begins with your current monthly income -- the average of all income received during the six full calendar months before filing. This figure is annualized and compared to the median family income for a household of your size in the District of Columbia.
The Census Bureau and the U.S. Trustee Program publish updated median income figures periodically. As of 2024, the approximate DC median income figures are:
- 1-person household: $78,471
- 2-person household: $109,938
- 3-person household: $121,989
- 4-person household: $143,592
These figures are significantly higher than the national median because DC has one of the highest costs of living in the country. For many DC residents, this means they fall below the median even with incomes that would be above-median in other jurisdictions.
Below-median debtors are required to commit disposable income for a minimum of 36 months (three years). Above-median debtors must commit disposable income for a minimum of 60 months (five years). See 11 U.S.C. Section 1325(b)(4).
Test Two: Best Interest of Creditors
Under Section 1325(a)(4), unsecured creditors in your Chapter 13 plan must receive at least as much as they would have received in a Chapter 7 liquidation.
This means you must calculate what a Chapter 7 trustee would have distributed to unsecured creditors if you had filed under Chapter 7 instead. The calculation requires:
- Determining the value of all your non-exempt property.
- Subtracting the costs of liquidation (trustee fees, administrative costs).
- The resulting amount is the minimum that your Chapter 13 plan must pay to unsecured creditors.
If all of your property is exempt under either DC Code Section 15-501 or the federal exemptions under 11 U.S.C. Section 522(d), then the best interest test requires zero payment to unsecured creditors -- meaning this test does not increase your plan payment.
However, if you own significant non-exempt property -- for example, equity in a second property or a valuable vehicle that exceeds the exemption amount -- the best interest test can substantially increase what your plan must pay.
Test Three: Secured and Priority Debts
Certain debts must be paid in full through your Chapter 13 plan regardless of your disposable income:
Priority debts include:
- Domestic support obligations (child support and alimony arrearages) under Section 507(a)(1) -- must be paid in full.
- Tax debts that are priority claims under Section 507(a)(8) -- must be paid in full.
- Administrative expenses -- trustee fees and attorney fees approved by the court.
Secured debts are treated based on the type of collateral:
- Mortgage arrearages. If you are behind on your mortgage, the Chapter 13 plan must cure the arrearage over the life of the plan while you continue making regular mortgage payments outside the plan. See Section 1322(b)(5).
- Car loans. If the vehicle was purchased more than 910 days before filing, the plan can reduce the secured claim to the vehicle's value (cramdown) under Section 506(a). If purchased within 910 days, the full loan balance must be paid.
- Other secured debts. Tax liens, judgment liens, and other secured claims are paid through the plan to the extent of the collateral's value.
Putting It Together: A DC Example
Consider a DC resident with the following situation:
- Household income: $6,500 per month (below DC median for a single filer)
- Reasonable monthly expenses: $5,200
- Mortgage arrearage: $9,000
- Priority tax debt: $3,600
- Car loan balance: $12,000 (vehicle value $8,000, purchased 3 years ago)
- Unsecured debt: $45,000
- Non-exempt property value: $0
Disposable income: $6,500 - $5,200 = $1,300 per month.
Plan length: 36 months (below-median debtor), but the debtor can propose up to 60 months.
Minimum plan payments must cover:
- Mortgage arrearage: $9,000
- Priority taxes: $3,600
- Secured car claim: $8,000 (crammed down to value)
- Chapter 13 trustee fee: approximately 10% of plan payments
- Attorney fees: paid through the plan
Best interest test: $0 (all property is exempt).
At $1,300 per month over 36 months, the plan generates $46,800. After trustee fees of roughly $4,680, the net available is approximately $42,120. This covers the mortgage arrearage ($9,000), tax debt ($3,600), car claim ($8,000), and attorney fees, with the remainder going to unsecured creditors.
The unsecured creditors receive whatever is left after secured, priority, and administrative claims are paid. In many DC Chapter 13 cases, unsecured creditors receive pennies on the dollar -- and that is legally permissible as long as the three tests are satisfied.
The Trustee's Role
The Chapter 13 standing trustee for the District of Columbia reviews every proposed plan, examines the debtor's income and expenses, and may object if the plan does not commit sufficient disposable income. The trustee will scrutinize:
- Whether your reported expenses are reasonable
- Whether you have additional income sources not reflected in the means test
- Whether the plan satisfies the best interest of creditors test
- Whether secured and priority claims are properly treated
Expect to provide documentation -- pay stubs, tax returns, bank statements -- to support the numbers in your plan.
Modifying the Plan
Life changes during a three-to-five-year repayment period. If your income increases or decreases, you can file a motion to modify the plan under Section 1329. If you lose your job, you may be eligible to convert to Chapter 7 or request a hardship discharge under Section 1328(b).
The flexibility of Chapter 13 is one of its greatest advantages for DC residents with regular income who need time to catch up on secured debts while obtaining relief from unsecured obligations.