Chapter 13 bankruptcy allows you to reorganize your personal finances. If you have fallen behind on your mortgage, Chapter 13 bankruptcy allows you to catch up on your payments. Most importantly, Chapter 13 requires you to repay some, or all, of your creditors. How much you will have to pay back depends on what your monthly “disposable income” is.
Section 1325(b)(2) defines what disposable income is and states:
“disposable income” means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended—
(A) (i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and
(ii) for charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.
