How Much Will My Chapter 13 Plan Payment Be?
by Luke Homen
Video Transcript
What is the purpose of a Chapter 13 plan payment?
In this episode, Luke Homen, founder of Convenient Bankruptcy, explains one of the most common questions clients have when filing for Chapter 13 bankruptcy: how monthly plan payments are calculated. He begins by clarifying that the Chapter 13 payment is the single monthly payment made to the Chapter 13 trustee over the course of 60 months. The trustee, guided by a court order, distributes this payment to various creditors based on legal priority.
Instead of juggling multiple bills each month, individuals in Chapter 13 make one consolidated payment that simplifies their finances. The trustee then allocates funds to secured debts, unsecured debts, administrative fees, and other required obligations.
What factors determine the amount of a Chapter 13 payment?
Luke explains that the Chapter 13 payment is based on a formula that considers several financial components: income, assets, debt types, and monthly expenses. These numbers determine how much of an individual’s unsecured debts—like credit cards, medical bills, or payday loans—must be repaid.
High-income earners typically fall into a 100% plan, meaning they pay back all of their debts through the bankruptcy. On the other end of the spectrum, some debtors qualify for a 0% plan, paying none of their unsecured debts because their income is too low or they filed Chapter 13 to stop foreclosure. Many clients, however, fall somewhere in between.
In Oklahoma, Luke notes, some plans pay 0%, while other regions have a minimum threshold of 10%. Ultimately, the debtor’s income level dictates how much unsecured debt must be repaid.
How are secured debts handled in Chapter 13 bankruptcy?
Secured debts—such as mortgages and car loans—require a different analysis. Luke emphasizes that debtors must first decide whether they want to keep the secured asset. For those with higher incomes under a 100% plan, keeping secured debts typically makes sense. But if income is limited, surrendering one or more vehicles or properties can provide significant financial relief.
For debts that are kept, Chapter 13 allows for powerful adjustments. Payments on cars, for example, can often be stretched over 60 months, reducing the monthly burden. Interest rates can also be lowered from high levels—such as 24%—to more manageable rates, saving debtors thousands of dollars.
Luke also highlights the “cram down” option, which lets debtors reduce the amount owed on a car loan if the vehicle was purchased more than 910 days before filing. Additionally, Chapter 13 plans allow overdue payments—called arrearages—to be spread over 60 months. This feature helps homeowners stop foreclosure by catching up on past-due mortgage payments over time rather than paying them all at once.
How are priority debts treated in Chapter 13 plans?
Priority debts—such as tax obligations and child support arrears—receive special treatment in Chapter 13. Luke explains that because bankruptcy operates through the federal government, priority debts must be paid in full. These obligations take precedence over unsecured debts and cannot be reduced or discharged through bankruptcy.
He emphasizes the importance of identifying these debts early in the process, since they directly impact the overall plan payment. Unlike other categories, priority debts are non-negotiable—they must be fully repaid during the five-year plan period.
What are the administrative costs and trustee fees in Chapter 13?
Administrative costs include payments to the debtor’s own bankruptcy attorney and the Chapter 13 trustee’s office. In most cases, the bankruptcy attorney does not receive full payment upfront. Instead, their fee is built into the plan and distributed monthly by the trustee—often around $40 or more per month over the 60-month plan.
The trustee’s office also receives a small percentage of each payment—usually between 7% and 10%—to cover administrative expenses and fund operations. Luke assures clients that these fees are minimal compared to the savings achieved by lowering interest rates, stretching payments, and restructuring debts through the Chapter 13 process.
How is the final monthly Chapter 13 payment calculated?
The calculation of a Chapter 13 payment evolves over time. Luke outlines several stages:
- Initial Consultation Estimate – Based on the client’s reported income, debts, and expenses, the attorney provides a preliminary estimate using a spreadsheet or worksheet.
- Pre-Filing Review – Once documents like pay stubs and credit reports are collected, the estimate becomes more accurate.
- Creditor Claims Stage – After filing, creditors submit official proofs of claim, confirming exact balances and any added fees.
- Judicial Review – The final plan payment is set once the judge reviews all submitted information.
Clients begin making payments immediately based on the initial estimate. After the court finalizes the plan, the amount may be slightly adjusted—often by only a few dollars.
Can Chapter 13 payments change over time?
Luke confirms that Chapter 13 payments can be modified if the debtor’s financial situation changes. For example, a loss of income or job change may warrant a reduction in payment through a “motion to modify” or amended plan.
Common life events—like pay cuts, vehicle accidents, or unexpected expenses—can justify an adjustment. However, small fluctuations in weekly hours or minor income differences are typically not enough to trigger a modification. Significant, documentable changes are required for the court to approve a revised payment amount.
What happens when creditors or trustees object to the plan?
Objections are common in Chapter 13 cases. Luke explains that government agencies, such as the tax commission, frequently file objections if tax returns are missing or incomplete. Creditors may also object when interest rates or payment amounts are reduced.
Most objections are resolved through negotiation between attorneys. Because all financial data is transparent in bankruptcy, there is usually little to fight over. If no agreement can be reached, the issue is presented to a judge, who reviews the facts and makes a decision. However, Luke notes that contested hearings are rare since both creditors and debtors typically prefer efficient resolutions.
How can you get an accurate Chapter 13 payment estimate before filing?
Luke concludes by stressing the importance of working with an experienced bankruptcy attorney who can accurately estimate a Chapter 13 payment before filing. He cautions clients against attorneys who refuse to provide estimates, explaining that a knowledgeable lawyer should always be able to predict a realistic payment range based on known factors.
At Convenient Bankruptcy, Luke ensures clients have a clear understanding of their potential payment from the very first consultation. This transparency allows individuals to make informed decisions, evaluate affordability, and proceed confidently toward financial recovery.
He advises anyone considering Chapter 13 to seek out an attorney who understands the complex math behind the process—ensuring that every client begins their bankruptcy journey with open eyes and a strong financial plan.
Attorney Luke Homen is the President of Convenient Bankruptcy. He places great value on helping individuals and families solve their financial challenges and achieve real financial freedom. His goal is to find a customized solution that fits each client’s unique situation. Luke has been practicing law since 2008, and was voted “Best Bankruptcy Attorney in Oklahoma” by The Oklahoman in the Reader’s Choice Awards.
