For many, filing for Chapter 13 bankruptcy can be incredibly beneficial, as it can help you receive a financial fresh start by reorganizing your debts. However, this process can be overwhelming to navigate, especially when your income changes. As such, the following blog explores what you should know about these complicated matters, including the importance of working with a Memphis, TN Chapter 13 bankruptcy lawyer to help guide you through this process. In addition, you’ll discover what happens if you fail to inform your trustee of the changes to your income.
What Happens if My Income Increases or Decreases During Chapter 13?
When you file for Chapter 13 bankruptcy, the trustee assigned to your case will determine a payment plan based on your disposable income. However, if your income changes, it can warrant a change in your current plan.
In the event your income decreases, whether due to job loss, reduced hours, or a health condition that renders you unable to work, you can petition the court to reduce how much your monthly payments to creditors are. Under some extreme circumstances, the court may grant a hardship discharge. This discharges your unsecured debts early and closes your bankruptcy case before you’ve completed the payment plan.
On the flip side, if your income increases, it can result in your monthly payments increasing. This is often the case if you’ve received a significant raise or promotion, or you start working an additional job or gain another avenue of income. This is also the case for any bonuses earned while working.
Do I Need to Tell My Trustee if My Income Changes?
In the event your income changes, regardless of whether it increases or decreases, you are legally required to inform your bankruptcy trustee of this change. Unfortunately, many who see an increase in income assume that they can simply avoid telling their trustee, as they do not want to sacrifice these funds. However, it’s likely that your trustee will uncover this change in income, and if you do not report it, you can face serious consequences.
Generally, failure to report a change in income, especially an increase, can result in the conversion of your case to Chapter 7. This means that your assets may be at risk of liquidation. You may also find that your case can be dismissed, meaning your eligible debts will not be discharged, and debt collectors can resume actions against you, like wage garnishments or lawsuits.
When your income changes during bankruptcy, it can be overwhelming to navigate these changes. That is why it’s in your best interest to connect with an experienced attorney with the Arnold Law Firm. Our team understands how difficult these matters can be, which is why we will do everything in our power to help you reap the benefits of bankruptcy by ensuring your filing is accurate. When you need assistance, connect with us today.
