Step-Up and Step-Down Chapter 13 Plan Payments

How do step-up and step-down plan payments actually work?

A step plan proposes a schedule of payment amounts instead of one number for the entire case. A step-up starts lower and rises later — often timed to an expected raise, the end of a car loan, or a return to full-time work. A step-down starts higher and falls, often when a temporary source of income is expected to end.

Official guidance notes that a plan may provide for the debtor to pay a different amount at one or more specified times, and that such plans are commonly referred to as "step" plans, though Chapter 13 plans typically provide for the debtor to pay a regular fixed amount (U.S. Bankr. Ct. S.D. Ala., SBRA guide (Judge Paul Bonapfel, 338 pp.) (updated June 2022)).

The plan itself is where this is set out. A Chapter 13 plan must provide for the submission of enough of the debtor's future earnings or income to the trustee as is necessary to execute the plan (11 U.S.C. § 1322(a)(1)). A graduated schedule still has to fund everything the plan promises to pay.

• Step-up: payments begin lower and increase on a stated date or after a stated number of months.
• Step-down: payments begin higher and decrease when a temporary income source is expected to end.
• Either way, the schedule is written into the plan and the trustee disburses according to it.

What makes a court more or less likely to confirm a graduated plan?

The central question is feasibility. A court confirms a plan only if, among other requirements, the debtor will be able to make all payments under the plan and to comply with the plan (11 U.S.C. § 1325(a)(6)). A step-up built on a raise that is speculative is harder to defend than one built on a car loan with a known payoff date. Good faith is also a listed requirement — the plan must have been proposed in good faith and not by any means forbidden by law (11 U.S.C. § 1325(a)(3)).

The amount the plan pays matters as well. Unsecured creditors must receive at least what they would get in a Chapter 7 liquidation as of the effective date of the plan (11 U.S.C. § 1325(a)(4)). And where the plan pays a secured claim in periodic payments, those payments must be in equal monthly amounts, with personal-property collateral also requiring adequate protection during the plan (11 U.S.C. § 1325(a)(5)(B)(iii)).

That last requirement is why many step plans vary the total payment while holding certain secured payments steady.

• Documented, dated income changes are easier to support than general optimism about future earnings.
• Periodic payments on an allowed secured claim must be in equal monthly amounts (11 U.S.C. § 1325(a)(5)(B)(iii)).
• Trustees and creditors can object to confirmation, and a step schedule gives them something specific to test.

What does federal law say about varying plan payments?

Three sections of the Bankruptcy Code do most of the work here.

Section 1322 sets what a plan must and may contain. It requires submission of future income sufficient to execute the plan and full payment in deferred cash payments of priority claims unless the holder agrees otherwise (11 U.S.C. § 1322(a)(1)–(2)). It also permits curing defaults and maintaining payments on long-term debts while the case is pending (11 U.S.C. § 1322(b)(3), (b)(5)).

Section 1325 governs confirmation, including the feasibility requirement in § 1325(a)(6) and the good-faith requirement in § 1325(a)(3).

Section 1329 governs what happens after confirmation. At any time after confirmation but before completion of payments, the plan may be modified on request of the debtor, the trustee, or the holder of an allowed unsecured claim to increase or reduce the amount of payments on claims of a particular class, or to extend or reduce the time for those payments (11 U.S.C. § 1329(a)(1)–(2)). The requirements of § 1325(a) apply to any such modification (11 U.S.C. § 1329(b)(1)).

When do payments start, and can they change before confirmation?

Payments begin early. Unless the court orders otherwise, the debtor must commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount proposed by the plan to the trustee (11 U.S.C. § 1326(a)(1)(A)).

The trustee holds those payments until confirmation or denial of confirmation. If the plan is confirmed, the trustee distributes them in accordance with the plan as soon as practicable; if it is not confirmed, the trustee returns payments not previously paid and not yet due and owing to creditors, after deducting any unpaid claim allowed under § 503(b) (11 U.S.C. § 1326(a)(2)).

A change before confirmation is possible. Subject to § 363, the court may, upon notice and a hearing, modify, increase, or reduce the payments required under that subsection pending confirmation of a plan (11 U.S.C. § 1326(a)(3)). There is also a 60-day deadline to give a lessor or purchase-money secured creditor reasonable evidence of required insurance on retained personal property (11 U.S.C. § 1326(a)(4)).

Where do local court rules and practices differ?

The Bankruptcy Code is federal, but the plan form, the notice a change requires, and how the trustee handles it are local. This is district practice, not state law, so the district you file in matters more than the state.

Some districts require conforming plans and specify how amendments are noticed. In the District of Utah, plans must conform to the Official Form 113 Chapter 13 Plan posted on the court's website, and a pre-confirmation amendment with a material negative impact on creditors requires a Notice of Amended Plan summarizing the changes between the prior and amended plan (Bankr. D. Utah LBR 2083-1).

Other districts limit service for benign changes. In the Southern District of Illinois, service of an amended plan may be limited to the trustee where the proposed plan only changes the terms by increasing the plan payment amount or plan duration, and objections to plans amended after confirmation are due no later than 21 days after filing (Bankr. S.D. Ill. official guidance — Chapter 13 Procedures Manual).

Check your own district's rules and plan form before assuming anything.

• Some districts restrict reducing trustee payments — one rule provides that the debtor shall not reduce payments to the Chapter 13 trustee notwithstanding § 1326(a)(1)(B) and (C) (N.D. Ind. L.B.R. B-4002-2).
• Whether a post-confirmation change is an amended plan, an agreed entry, or a motion to modify can turn on local practice (Bankr. S.D. Ind. official guidance — View flowchart for determining which event should be used).
• Find your court through /courts before relying on any general description of procedure.

What does a step plan look like in practice?

The most defensible step-ups are tied to an event with a date. A vehicle loan being paid directly outside the plan finishes in month 20, freeing that monthly amount; the plan steps up by roughly that amount in month 21. A spouse returns to work after a documented parental leave. A wage garnishment ends.

Step-downs run the other way. Severance or a temporary assignment supports a higher payment for a defined stretch, after which the payment drops to what ordinary wages support.

Official court material also shows payment amounts that change on a schedule inside a plan — a sample hypothetical describes a mortgage-related monthly payment set at a starting figure beginning six months into the case, with the actual amount the creditor eventually receives driven by the plan's distribution waterfall (CANB official material — Ralph and Alice Cramdown Hypothetical).

More aggressive structures exist. Guidance discusses plans paying actual disposable income rather than a fixed monthly amount, possibly with minimum or maximum requirements, and notes that careful drafting matters because disputes arise when a plan provides for payment other than fixed amounts (U.S. Bankr. Ct. S.D. Ala., SBRA guide (Judge Paul Bonapfel, 338 pp.) (updated June 2022)).

What documents and information does a step plan involve?

The plan itself is the main document — it states the payment amounts, when each takes effect, and how claims are treated. Beyond that, expect to supply whatever supports the schedule you propose.

The official forms already contemplate changing income. Official Form 122C-2 calculates disposable income under § 1325(b)(2) and includes a part asking you to report a change in income or expenses if the amounts reported have changed or are virtually certain to change after the filing date and during the time the case will be open (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).

Filings also carry court fees. The Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)), plus a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8, effective December 1, 2023). Those are court fees, not attorney fees, and are separate from your plan payments.

• The proposed plan, on your district's required form, showing each payment tier and its start date.
• Proof supporting the change — a loan payoff schedule, an offer letter, a leave-end date, or a garnishment order.
• Official Form 122C-2, including the part addressing changes in income or expenses.
• Post-confirmation, whatever motion, notice, or agreed entry your district requires for a modification.

What should you ask a bankruptcy lawyer about a step plan?

Bring the specific event your step is built around, with dates and paperwork, and ask how it will be received in your district.

Useful questions include whether the trustee in your district routinely objects to step-ups, how far out a step can reasonably be scheduled, and whether the step interacts with a secured claim that must be paid in equal monthly amounts under 11 U.S.C. § 1325(a)(5)(B)(iii).

Ask also about the back end. Modification after confirmation is available on request of the debtor, the trustee, or the holder of an allowed unsecured claim (11 U.S.C. § 1329(a)), but there is an outer limit: a modified plan may not provide for payments over a period expiring after the applicable commitment period following the time the first payment under the original confirmed plan was due, unless the court for cause approves a longer period, and the court may not approve a period expiring after five years after that time (11 U.S.C. § 1329(c)).

A lawyer can tell you whether a step plan or a fixed plan with a later modification is the better route for your facts.

Frequently asked questions

Is a step-up plan harder to get confirmed than a flat plan?

It can be, because it adds something for the trustee and creditors to test. Confirmation requires that the debtor will be able to make all payments under the plan and comply with it (11 U.S.C. § 1325(a)(6)), and official guidance notes that Chapter 13 plans typically provide for a regular fixed amount. A step tied to a documented, dated event is easier to support than one tied to hoped-for income.

Can my plan payment be lowered after the judge confirms it?

Yes, modification is available. At any time after confirmation but before completion of payments, the plan may be modified on request of the debtor, the trustee, or the holder of an allowed unsecured claim to increase or reduce the amount of payments on claims of a particular class, or to extend or reduce the time for such payments (11 U.S.C. § 1329(a)(1)–(2)). The requirements of § 1325(a) apply to the modification.

How long can a modified plan run?

There is an outer limit. A plan modified under § 1329 may not provide for payments over a period expiring after the applicable commitment period under § 1325(b)(1)(B) following the time the first payment under the original confirmed plan was due, unless the court for cause approves a longer period — and the court may not approve a period expiring after five years after that time (11 U.S.C. § 1329(c)).

When does my first plan payment have to start?

Early, and usually before confirmation. Unless the court orders otherwise, the debtor must commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount proposed by the plan to the trustee (11 U.S.C. § 1326(a)(1)(A)). The trustee retains those payments until confirmation or denial of confirmation.

Can payments change before the plan is confirmed?

They can. Subject to § 363, the court may, upon notice and a hearing, modify, increase, or reduce the payments required under § 1326(a) pending confirmation of a plan (11 U.S.C. § 1326(a)(3)). Local practice also matters — one district rule provides that the debtor shall not reduce payments to the Chapter 13 trustee notwithstanding § 1326(a)(1)(B) and (C) (N.D. Ind. L.B.R. B-4002-2).

Does a step plan change what my creditors have to receive?

No. The confirmation standards apply regardless of the payment shape. Unsecured creditors must receive at least what they would receive in a Chapter 7 liquidation as of the effective date of the plan (11 U.S.C. § 1325(a)(4)), and where a secured claim is paid in periodic payments, those payments must be in equal monthly amounts (11 U.S.C. § 1325(a)(5)(B)(iii)).

What does it cost to file a Chapter 13 case?

The Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)), and an administrative fee of $78 is collected as well (Bankruptcy Court Miscellaneous Fee Schedule, Item 8, effective December 1, 2023). Those are court fees, separate from attorney fees and from your monthly plan payments. The statute permits installment payment of the filing fee for an individual commencing a voluntary or joint case.

Sources

• 11 U.S.C. § 1322 — Contents of plan · official source
• 11 U.S.C. § 1325 — Confirmation of plan · official source
• 11 U.S.C. § 1326 — Payments · official source
• 11 U.S.C. § 1329 — Modification of plan after confirmation · official source
• U.S. Bankr. Ct. S.D. Ala., SBRA guide (Judge Paul Bonapfel, 338 pp.) (updated June 2022)
• Bankr. D. Utah LBR 2083-1 — Chapter 13 – General
• Bankr. S.D. Ill. official guidance — Chapter 13 Procedures Manual
• N.D. Ind. L.B.R. B-4002-2 — Payments by Debtors in Chapter 13 Cases
• Bankr. S.D. Ind. official guidance — View flowchart for determining which event should be used
• CANB official material — Ralph and Alice Cramdown Hypothetical
• U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy
• 28 U.S.C. § 1930(a)(1)(B) — Chapter 13 filing fee
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8 — Administrative fee

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