What happens if income increase not reported?

[Gone to Texas]

I may be getting a raise of around 15% and would simply like to fly under the radar. I've been in Chapter 13 for about 18 months and have 18 months to go.

What happens if the trustee suddenly audits me? Is it always an automatic dismissal for not reporting the income increase immediately or do the trustee's tend to work with you?

I'm under the old law. I figure the trustee is so busy with the new Chapter 13 filers that as long as I make my payments on time there's not much to worry about.

Thanks!

[aa06a47]

I wouldn't assume the trustee is so busy, generally, the trustee has a pretty large staff working for him/her.

I would say you have less than a 5% chance of getting caught...do you feel lucky? You do appear to already know what could happen if you don't report it.

Your question does beg a few follow up questions.......define 15%..is it like a 15K raise or a 5K raise. What is your % payback? I understand lower percentage pay backs raise the flag more than high percentage paybacks.

[bkbiker]

Hi,

What does your plan say? If anything about this?

Most of the old chapter 13 plans are not very specific, mine just says to devote all my disposal income to plan.

So that being the case; what is your disposal income? Now just because you got a raise does not mean your disposal income also increased! I am sure your expenses over the last 18 months have also increased a lot, example are; health insurance, food, gas, medications, clothing, car insurance, house payments or rent, children’s needs, so you get the picture. If you really start to think about it, your real disposal income might have actually gone down.

If your plan does not address this issue, than my suggestion would to be keep your plan and payments on auto pilot and do nothing. If you need assurance, call your lawyer first, do not contact the trustee.

On the few cases I have read about increases in wages, they are where the debtor was required to submit income tax returns and than the plan payments were modified at the time the trustee learned about the new disposable income, the new payment were not retroactive and there is court case presentment for this action.

If you have anymore questions, please submit,

Take care, and good luck,
bkbiker

[Jeffrey]

I too have a question about this... I recently got a raise from my second job. Filed under the old law. I went from $9.97 to $11.50 an hour. I don't have to submit my taxreturns that I know of.

I make a few $100 more a month now. Now... obviously gas has gone up... so while the raise helps... its not like I'm rolling in money... not to mention the cost of living in general. ( Live in California ).

The question is I guess... should I report it? Seems like it would be a wash.

Also... what the heck is Pacer?

[bkbiker]

hey Jeffrey,

check out the general bankruptcy talk, than the sticky labeled pacer,

like you said your expenses have also gone up, so you are about even


Take care, and good luck,
bkbiker

[Gone to Texas]

Hi,

What does your plan say? If anything about this?

Most of the old chapter 13 plans are not very specific, mine just says to devote all my disposal income to plan.

Mine isn't that specific either. It says "any material increase in income" must be reported.

My trustee doesn't ask for tax returns and this is Texas which has a tendency to be very lenient towards debtors.

My main concern is that if the trustee does find out about an increase will he automatically dismiss me or can my attorney work a deal? Unfortunately my attorney is deployed to Iraq so I don't have anyone I can call unless I want to pay the $$$ to retain another one.

Your and the others answers are very helpful. I'm not really trying to pull anything I just want to stay under the radar and not have to deal with the court system again. I'm sure you can relate!

Thanks.

GTT

[Gone to Texas]

Your question does beg a few follow up questions.......define 15%..is it like a 15K raise or a 5K raise. What is your % payback? I understand lower percentage pay backs raise the flag more than high percentage paybacks.

It's more like 15K a year. I am paying everything to unsecured credit card debt and that's at about 60% of the filed claims.

I also am afraid that the industry I'm in (airlines) could suddenly get hammered again plus I have some big tax bills coming up due to some forgiveness of debt (Form 1099) that I have to deal with. I just as soon do this on my own without involving the trustee. I only have 18 months left to go.

Thanks!

GTT

[Jeffrey]

Thx

hey Jeffrey,

check out the general bankruptcy talk, than the sticky labeled pacer,

like you said your expenses have also gone up, so you are about even


Take care, and good luck,
bkbiker

[bkbiker]

hey gone to texas,

The trustee can not dismiss your case with-out first notifying you and/or setting up a hearing before the court. You will have time to present your side of the case.

With your attorney out of the country, make sure the bankruptcy court has your correct address, so that you will be informed of any hearing. Also you could check the status of your case every few weeks with pacer or the texas bankruptcy court web page if they have one.

bkbiker

[aa06a47]

It's more like 15K a year. I am paying everything to unsecured credit card debt and that's at about 60% of the filed claims.

I also am afraid that the industry I'm in (airlines) could suddenly get hammered again plus I have some big tax bills coming up due to some forgiveness of debt (Form 1099) that I have to deal with. I just as soon do this on my own without involving the trustee. I only have 18 months left to go.

Thanks!

GTT

That's a good raise, if the trustee finds out, he is going to want some of it. I would wait until your attorney returns from Iraq before doing anything. Then I would not tell the attorney what % of raise you got, he may ask, and then you should tell him. I would just word it like I got a raise at work and was wondering if I should report it to the trustee.

The old rule generally was any raise over 10% you needed to notify the trustee. I don't think that was the law, but the past practice so to speak.

On a side note:

That is one of the most confusing parts of a Chapter 13. The lawyers know something they can't tell us (in my opinion)....my attorney told me to lay low, keep flying under the radar, and everything will be OK. The "plan payment will not change now". However, we all know what the trustee said at the 341 meeting...I think mine said "report any significant change in income"...well, what the hell is "significant". I guess I will define it as 1% more than I get in raises!!!

[Gone to Texas]

That is one of the most confusing parts of a Chapter 13. The lawyers know something they can't tell us (in my opinion)....my attorney told me to lay low, keep flying under the radar, and everything will be OK. The "plan payment will not change now".

My attorney said exactly that. Just lay low and fly under the radar. The hard part is getting confirmed he said and once that happens all the court really cares about is that you make the plan payments on time.

I think if I did get audited the trustee and my attorney would cut a deal that would increase my payments for the remainder of the time. I would assume the trustee does not want to see a Chapter 13 plan dismissed if he can help it. For one he loses his 10% cut... right?

I think the final 18 months will go fast and that the trustee is more concerned with the new Chapter 13 filers under the new law. It is far more stringent unfortunately and requires a lot more oversight by the trustee.

I'm not trying to pull any capers here. I simply don't want to go back into the court system if I can help it. I feel like I'm paying back a fair chunk of my debt and I'd like to leave well enough alone.

Thanks!

GTT

[Gone to Texas]

hey gone to texas,

The trustee can not dismiss your case with-out first notifying you and/or setting up a hearing before the court. You will have time to present your side of the case.

With your attorney out of the country, make sure the bankruptcy court has your correct address, so that you will be informed of any hearing. Also you could check the status of your case every few weeks with pacer or the texas bankruptcy court web page if they have one.

bkbiker

Darn good advice and I do keep up with it. There's been nothing on Pacer for over 14 months now. I figure if I "get caught" I will simply work with the trustee and another attorney to modify my plan to everyone's liking. My main concern is that the case would be dismissed with the resultant hammering from the creditors. But I think I'm just being paranoid. The court I am sure is willing to deal.

Good for you by the way for how far you have come. Hang in there.

GTT

[Gone to Texas]

...well, what the hell is "significant". I guess I will define it as 1% more than I get in raises!!!

That is how I define the "material change in income" in my court order. I'm trying to do it right but there is a lot of gray area...

GTT

[anonymuse]

That is how I define the "material change in income" in my court order. I'm trying to do it right but there is a lot of gray area...

GTT

When I found some training materials for trustees on what to look for when reviewing the forms.

http://www.bankruptcyforum.com/t7296-what-trustees-look-for-when-filling-out-forms.html

On Schedule I they pointed out "Describe any increase or decrease in income reasonably anticipated..." and specificallly pointed out that it is no longer restricted to 10%.

Not the exact thing you are looking for, but I thought worth a mention--but still just fly under the radar as previous people have posted.

Congrats on the raise, irregardless of whether it goes to payback creditors, that's great to know its there for you after the plan.

Remember, just because you got a 15% raise, doesn't mean 15% increase in disposable income. Your taxes may have increased. Do you need more professional clothing due to added customer facing responsibilities?

For now, make sure you have properly adjusted your exemptions so that you don't wind up with a big fat return from the IRS. If you need to do essential things that you've been putting off, now's the time to do it: go to the dentist, update the prescription on your glasses, get new tires for the car. Have you been contributing to a 401K? Might consider a very slight increase to it.

Hope your lawyer is doing well.