The bankruptcy income test examines financial records, including income, expenses, and secured and unsecured debts, to determine if your disposable income is below your state's average income (50% lower, 50% higher). The income level for the media test varies by state. A bankruptcy under chapter 13 is also called a wage earner plan. It allows people with a regular income to develop a plan to pay all or part of their debts.
Under this chapter, debtors propose a payment plan to pay installments to creditors within three to five years. If the debtor's current monthly income is lower than the applicable state median, the plan will run for three years, unless the court approves a longer period for good cause. Under no circumstances may a plan provide for payments over a period exceeding five years. During this time, the law prohibits creditors from starting or continuing collection efforts.
Chapter 13 bankruptcy works slightly differently, as it allows you to keep your property in exchange for partially or fully paying off your debt. The bankruptcy court and your lawyer will negotiate a three- to five-year payment plan. Depending on what you negotiate, you can agree to pay all or part of your debt during that period of time. When you have completed the agreed payment plan, your debt will be canceled, even if you have only paid part of the amount you originally owed.