Effects of a wage increase during a Chapter 13 Bankruptcy
Individuals and married couples in Minnesota who are having difficulty making ends meet due to overwhelming debt frequently choose to file for Chapter 13 bankruptcy relief. Chapter 13 is a versatile tool that can allow you to protect assets, while restructuring debt over the course of 36 to months. After a successful conclusion to the bankruptcy process, people enjoy a fresh financial start.
Sometimes, a person’s earnings will increase during the Chapter 13 bankruptcy process. The question arises, what becomes of the increase in income?
Bankruptcy law requires the debtor to contribute projected expendable income to the repayment plan for three to five years. Disposable income is that portion of the debtor’s income that remains after deducting all of the expected reasonable costs of living are deducted from total income. Changes in your total may affect the payment plan only if relevant circumstances are deemed appropriate for such a change. When an individual receives an increase in income during the process, the bankruptcy trustee will generally file a motion to modify the payment plan to conform to the new change in income.
It is important to work with an experienced bankruptcy lawyer from the beginning to protect interests. It’s possible, for example, that overall income will change after filing the petition. When changes occur, the trustee will consider any salary increase, as well as any other increase in expendable income which the payment structure will be based on. Should expenses grow commensurate with income, then disposable income may remain the same and any payment plan will also remain the same. If the disposable income is substantially increased, the trustee can ask for larger payments.
Anyone Filing a Chapter 13 bankruptcy, should speak to a lawyer
It can be demoralizing to get a well-deserved raise only have to give it over to the trustee. An attorney, experienced in bankruptcy law can help you to protect your financial interests throughout the bankruptcy process.