One key benefit of using Chapter 13 bankruptcy is that it will teach you how to live on a budget. When you file for Chapter 13, your lawyer and the trustee will work with you to help you create this budget, and it will be based on your income and bills and the payments you must make to pay off your debts included in the bankruptcy. This plan can last up to five years, and it will not change unless you have a change in income. Here are a couple things to know if you experience a change in income during your plan.
Report all increases in income to the trustee
Whenever your income changes in either direction, you must report the changes to the trustee. This includes an increase in your normal salary, but it also includes any bonuses you received. In addition, if you receive money from an inheritance or anything else, you must report it.
Any increases in income may affect your Chapter 13 plan, and they will usually affect it by requiring you to pay extra money towards your plan. When your plan was created, it was based on a certain amount of income, but your payment amount is always subject to change if you begin earning more money.
Ask for changes if you experience a decrease in income
Reporting changes that decrease your income is also vital if you are in a Chapter 13 repayment plan. Decreases in income can make it more difficult to pay your normal repayment plan payments each week or month, but there are several things that can be done to help you with this.
One option the trustee could choose to do is temporarily stop your payments. This would be an option if you had lost your job and did not have any income for a period of time. If you lost your job and took a lower-paying job, the trustee could recalculate your budget and reduce your payments to reflect the decrease in your income. Another option would be to extend the length of your repayment plan. Each case is handled individually and on an as-needed basis.
If you have not yet filed for bankruptcy and are considering doing this to find relief for your debt, it is important for you to meet with a bankruptcy lawyer to find out how this could affect you and benefit you and your financial future. For more information, contact Hoffman, Hamer & Associates, PLLC or a similar firm.