A typical Chapter 13 plan lasts five years which is a long time. Circumstances, jobs, and incomes can change in five years
Disposable Income in Chapter 13 Bankruptcy
The basis for Chapter 13 payments to the bankruptcy trustee is derived from disposable income, or the money left over after the payment of allowed monthly living expenses and priority debt. If you have money left over after expenses reasonably necessary to support yourself and your family then you must pay this amount to your plan each month. This income is known as disposable income.
Changes in Income
Part of the bankruptcy paperwork we file with the court allows us to describe anticipated changes in income. These can include anticipated layoffs, raises, promotions, bonuses, reduction in hours, or overtime. If you expect any of these, it’s important that we list them in the bankruptcy paperwork.
Best Effort in Chapter 13
When filing for bankruptcy protection under Chapter 13, a debtor is required under the bankruptcy statues to put forth his or her best efforts to repay as much of the debt as is reasonably possible. If you have an increase in income during the five year Chapter 13 process, the trustee and court may require an increase in your plan payment to comply with the good faith requirement. If the bankruptcy trustee has reason to believe that their might be a change in income, the trustee often times will ask for tax returns and pay stubs to review any possible changes in income. Usually the trustee’s office will only do this if they suspect a change in income.
Because of the long-term financial and personal consequence involved with filing bankruptcy, it is always recommended that you speak to your Auburn bankruptcy attorney before filing who can help answer questions and advise you on changes that may occur during your Chapter 13 bankruptcy.
Categorized in: Chapter 13