Definition - What does Disposable Income mean?
Disposable income is the income that a person possesses after they have paid the various forms of income tax and other mandatory charges. For example, if a person has an income of $50,000.00, and they pay $15,000.00 in taxes and mandatory charges, then the remaining $35,000.00 would be considered disposable income. Disposable income is an important term for bankruptcy law because it can determine how much money a debtor has available to repay a debt.
Justipedia explains Disposable Income
Disposable income is basically just the money that a person has left over from their yearly earnings following the payment of their income taxes and other mandatory fees. This is an important distinction from income because even if a person has earned a certain amount of money in a year, that doesn't mean that they get to keep all of it. Income taxes will take out a percentage of the overall income. So, disposable income gives a much clearer picture of what a person will actually have to spend.