How a Chapter 13 Postconfirmation Affects Your Income

Under Chapter 13 bankruptcy law, individuals will work for several years, usually between three and five, to repay some debts. During this time period, most of the individual's disposable income will go to paying towards those debts in the repayment plan. For many, this will be a very limiting time in terms of income and being able to afford extras. However, for many others, it is a time for regrouping and making better financial decisions. It is also important to consider how post confirmation affects your income, and how your income affects your repayment plan.

Understanding Income in Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, individuals will set up a budget to show income and expenses for each month. Each dollar brought in needs to be accounted for on the budget in some way. Any disposable income, which is money left over after the bills are paid, is applied to the repayment plan. In order to do a repayment plan, there needs to be funds left over to pay back lenders. However, most debts, except for a mortgage, will be rolled into this plan. The plan does not cover your utilities, but car loans may be included.

What happens when your income changes? This is where it becomes somewhat challenging in a Chapter 13 post confirmation bankruptcy. The term post confirmation refers to the period of repayment, after the bankruptcy trustee agrees to your repayment plan. Keep this in mind when considering income.

• If your income increase post confirmation, the court can reassess the change and increase your repayment plan requirement.
• In some cases, the income changes, such as a cost of living wage increase, will not warrant a new repayment plan income evaluation.
• Most of the time, individuals will need to submit copies of tax records to the court to prove their income has remained the same.

Your income is likely to change after post confirmation, but these changes should be reported to the bankruptcy trustee. You are not limited to make the same amount each year, but any increases can affect how much you need to pay each month towards your repayment plan.

Hiring an Attorney

It is always wise to hire an attorney to help you to file Chapter 13 bankruptcy. The attorney works for you not only in the initial process of filing bankruptcy, but throughout your Chapter 13 repayment period. The attorney will offer advice and help you to handle changes in your income through the plan.