Filing for Chapter 13 bankruptcy can be both challenging and stressful. Although filing can help you eventually become debt free, the process itself can be confusing.
One common question that filers have regarding the Chapter 13 process involves income increases and whether they affect payment plans. An increase in income will likely impact your Chapter 13 repayment plan, and you are obligated to report wage increases to your bankruptcy trustee.
If you have further questions regarding filing for Chapter 13 bankruptcy, your best course of action may be to enlist the assistance of Chapter 13 bankruptcy lawyers. Seasoned bankruptcy lawyers can untangle the complex intricacies of filing, and they can help you create a financial plan for becoming debt free. For experienced Chapter 13 bankruptcy attorneys in Indiana, contact the offices of Sawin & Shea, LLC.
What If My Income Increases During Chapter 13 Bankruptcy?
When filing Chapter 13 bankruptcy, it’s important to note that the court determines your repayment plan based on your income minus any necessary daily-living expenses, such as food, rent, utilities, health care, and transportation. If you receive a pay increase and your cost of living remains the same, you’ll likely need to pay more on your repayment plan, but that’s not always the case.
The specific language of your repayment plan can impact whether or not you’ll need to pay more after receiving a bump in income, and if your increase in income isn’t significant, you might not be obligated to make larger payments.
Regardless of the amount of your Chapter 13 income increase, you need to report it to your bankruptcy trustee. Whether or not your payments increase will depend on your updated income compared to your expenses, so if your cost of living increases with your new income — for example, if you have to relocate to a more expensive part of the country for a new job — you might not need to make additional payments.
Additionally, if your Chapter 13 plan pays back all of your unsecured creditors, the court will likely not require you to make increased payments. If you decide to make greater payments in this scenario, you’ll complete the bankruptcy process faster.
What If I Receive a Bonus During the Chapter 13 Process?
You must report your bonuses to your bankruptcy trustee. If the bonus amount is insignificant, you’ll likely be able to keep it, but a substantial bonus will affect your repayment plan.
If you typically receive yearly or quarterly bonuses, you need to report them to your bankruptcy trustee when beginning the Chapter 13 process. Your bonuses will impact your Chapter 13 payment plan.
Can I Keep the Money From My Side Hustle?
The Chapter 13 payment plan takes all of your finances into account and not just the wages from your primary job. If you have a side business or another source of income, you must report your earnings to your bankruptcy trustee.
What If My Spouse Receives an Income Increase?
When determining your Chapter 13 payment plan, your bankruptcy trustee evaluates your household’s disposable income. This means that your spouse’s wage increases, side hustles, and bonuses directly affect your Chapter 13 payment plan.
Fortunately, you can use your spouse’s expenses to reduce the amount of disposable income. For example, you can deduct what both you AND your spouse spend on food, utilities, housing, etc. Additionally, your spouse’s debts do not impact your payment plan unless they’re filing with you.
Will the Chapter 13 Bankruptcy Trustee Check My Income?
A Chapter 13 bankruptcy trustee will usually not closely monitor a person’s income during the bankruptcy process, but they have every right to request proof of your income and pay stubs. It’s not their responsibility to scrutinize your finances for any wage increases, so you need to report changes in your income.
If you fail to report an income increase to your bankruptcy trustee, you can lose the right to discharge your debts, and the court may dismiss your bankruptcy case.
Additionally, you may even face federal charges for consciously failing to report an income increase during Chapter 13 bankruptcy. You could face bankruptcy fraud charges, which come with a penalty of up to $250,000 and five years in prison.
Reporting a Change in Income
Fortunately, reporting a Chapter 13 income increase is a simple process. All you need to do is contact your bankruptcy trustee and inform them of the increase.
Before reporting the increase, you can also consult with a bankruptcy attorney. Bankruptcy attorneys specialize in assisting debtors with their finances and the filing process. They may be able to give you options that reduce the amount you’ll need to pay in the updated payment plan.
Contact an Indiana Chapter 13 Bankruptcy Attorney
If you’re looking for experienced Chapter 13 bankruptcy lawyers in Indianapolis, contact Sawin & Shea, LLC. We’ve helped numerous Indiana residents become debt-free through filing assistance and financial planning, and we also help our clients by stopping creditor harassment. To answer the question, “What if my income increases during Chapter 13?” and any other bankruptcy questions, call us today at 317-759-1483, or you can click here to schedule a FREE consultation.