Chapter 13

• When a debtor files a bankruptcy petition in a Washington State bankruptcy court, the clerk of the bankruptcy court transfers the petition to the U.S. Trustee. The U.S. Trustee appoints a bankruptcy trustee to administer the debtor's case. The Washington State bankruptcy court approves a debt repayment plan that the debtor must pay into each month. Usually, the debtor's monthly plan payments are deducted from his paycheck and paid to the bankruptcy trustee. The bankruptcy trustee then distributes payment to the debtor's creditors each month.
  
  

Payment Plan

• If the debtor misses a payment, the bankruptcy trustee must report the missed payment to the bankruptcy court. The bankruptcy court could end up dismissing the debtor's case. If the debtor begins having difficulty coming up with a monthly payment, she should attempt to convert to Chapter 7 bankruptcy. The federal Bankruptcy Code provides that a Chapter 13 debtor can convert to Chapter 7 bankruptcy at any time. The only caveat is that the debtor must pass the means test before she is allowed to convert to Chapter 7 bankruptcy.
  
  

Means Test

• To begin the means test, the debtor must compare his family income to the median family income for a family of the same size in Washington state. As of 2010, according to the Census Bureau, Washington State's median incomes were listed as: $49,124 for a single earner; $62,204 for a family of two; $71,354 for a family of three; and $81,26 for a family of four. If the debtor's family income is below the Washington state median, the debtor can convert to Chapter 7 bankruptcy. If the debtor's family income is above the Washington state median, the debtor needs to continue with the means test by calculating his monthly disposable income.
  
  

Disposable Income

• The debtor calculates her monthly disposable income by deducting her allowable monthly expenses from her monthly income. If the debtor's monthly disposable income is less than $100, she can convert to Chapter 7 bankruptcy. If the debtor's monthly disposable income is more than $100, but that amount would not pay at least 25 percent of her debts over the next five years, the debtor can convert to Chapter 7 bankruptcy. If the debtor's monthly disposable income is more than $100, and that amount would pay 25 percent of her debts over the next five years, then the debtor cannot convert to Chapter 7 bankruptcy.