If you’re in a Chapter 13 repayment plan, you understand how important tracking your finances and making on-time payments is. As such, if your income changes during your repayment plan, regardless of whether it increases or decreases, you may wonder how this will impact your bankruptcy case. If this reflects your circumstances, the following blog explores what you should know about these matters, including whether or not you must report these changes to your bankruptcy trustee. In addition, you’ll learn the importance of working with Columbus Chapter 13 bankruptcy lawyers to help you navigate this process so you can reap the full benefits of bankruptcy.
How Will an Increase or Decrease Impact My Plan?
In the event your income decreases during bankruptcy, whether due to a medical event that renders you unable to work, job loss, or reduced hours, you can request a plan to modify your payments. In some instances, if you are unable to meet the conditions of bankruptcy, the court may grant a hardship discharge. Essentially, this means that if you are unable to make payments due to extenuating circumstances outside of your control, the court will grant a discharge of your unsecured debts, meaning they can end your case early.
On the other hand, if your income increases because you were promoted or given a raise, for example, and the change in your income is significant, your bankruptcy trustee may seek a modification of your plan to increase how much you are responsible for paying. However, because the courts base the repayment amount on your disposable income and not your gross income, a change may not be warranted. This is also the case for bonuses or tips received through your job.
Am I Required to Tell the Court if My Income Changes During Chapter 13?
In the event that your income changes and you fail to report this to your bankruptcy trustee, it’s important to understand that keeping this information from your bankruptcy trustee can negatively impact your case. In the event you are found to have omitted this change in income, your case can be dismissed, meaning the court will close your case without a discharge, leaving you liable for the debts in your name and withdrawing the protection of the automatic stay. However, you may also have your case converted to Chapter 7, which can leave your secured assets vulnerable to liquidation. In some instances, you may even be accused of or charged with fraud.
If your income has changed, working with an attorney is critical. They can assist you in filing the motions quickly to seek a modification if your income has decreased, and can help you report any raises to the court to prevent accusations of fraud from arising.
When you are ready to file for bankruptcy, the team at Cousino & Weinzimmer LLC is here to assist you. We understand how complex these matters can be, which is why we are committed to guiding you through this process so you can reap the full benefits of a bankruptcy filing. When you need help, contact us today to learn how we can assist you.
