Chapter 13 Bankruptcy and Disposable Income

When filing for Chapter 13 bankruptcy in Arizona, the court appointed trustee will determine how much money you have available to repay your debts. This amount is known as “disposable income,” and it is the amount left over after the court deducts the living standards which include payroll deductions and allowable expenses such rent, food, and clothes.

The trustee will use the amount of disposable income to determine the repayment period.

Non-employment types of income, such as social security benefits, money from family and friends, and payments for special circumstances (for example, restitution for crime), are generally not included in the calculation for repayment in a Chapter 13 bankruptcy filing. But, in order to have these amounts excluded from the calculation, they should be kept in a separate bank account from your regular wages. If all of the incomes are lumped together in one account, they are said to be “co-mingled,” and could be counted in the disposable income calculations for Chapter 13 bankruptcy.

To avoid having the non-employment incomes added into the calculations for Chapter 13 disposable income, it is important to consult with a qualified bankruptcy attorney. An experienced Phoenix bankruptcy attorney can help you identify which types of incomes you have, and can advise you how to proceed if the incomes are co-mingled. In all cases, it is wise to seek the advice of a bankruptcy lawyer that has lengthy experience with filing Chapter 13 bankruptcy in Arizona.