The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7. In chapter 13, "disposable income" is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor's gross income.
If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. The "applicable commitment period" depends on the debtor's current monthly income.
The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size—and five years if the current monthly income is greater than a family of the same size. The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.
In Texas, under Chapter 13 bankruptcy, a repayment plan does not have to fully satisfy unsecured debts as long as it meets certain conditions. The plan must commit all of the debtor's projected 'disposable income' over a set period, known as the 'applicable commitment period,' to repay creditors. Disposable income is calculated by subtracting necessary expenses for the debtor's maintenance or support, and allowable charitable contributions, from the debtor's income. If the debtor owns a business, the disposable income calculation does not include business operating expenses. The applicable commitment period for the repayment plan is determined by the debtor's current monthly income relative to the state median income for a family of the same size. It is three years if the income is below the state median and five years if it is above. However, the plan period can be shorter than the applicable commitment period if the unsecured debts are fully paid off in less time.
