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Income Increase after CH 13 Plan

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  • Income Increase after CH 13 Plan

    What happens if your income increases over the life of a CH13 payment plan? Does 100% of the increase in your earnings get turned over to your trustee to pay back the creditors? What if the increase in income is something that is not consistent, like sales commissions?

    For easy math, lets say your monthly gross income is $5K, your allowable expenses are $4K, and your payment to the trustee is $1k per month. I know it's not that simple, but work with me!

    If your monthly income jumps to $8K per month, does the $3K per month all go to the trustee/payment plan, or do you get to keep any of it?

    Just a little sobering thinking you may never be able to make more over a 5 year period.

    Let me know everyone's thoughts. Thanks.

  • #2
    Originally posted by highlife View Post
    What happens if your income increases over the life of a CH13 payment plan? Does 100% of the increase in your earnings get turned over to your trustee to pay back the creditors? What if the increase in income is something that is not consistent, like sales commissions?

    For easy math, lets say your monthly gross income is $5K, your allowable expenses are $4K, and your payment to the trustee is $1k per month. I know it's not that simple, but work with me!

    If your monthly income jumps to $8K per month, does the $3K per month all go to the trustee/payment plan, or do you get to keep any of it?

    Just a little sobering thinking you may never be able to make more over a 5 year period.

    Let me know everyone's thoughts. Thanks.
    This seems to be district specific, and can even be trustee specific. Many trustees want to be aware of an increase in income if it is significant, others don't care at all. Your attorney would be able to best advise as to what is the norm in your district. We were told to inform our attorney for any change in income - whether an increase or a decrease. We did have one year in which the income increased by about 12% and didn't hear a thing from the trustee, even though our attorney was notified in writing of it.

    If you are self employed (you stated commissions) then your trustee may want to see financial statements from time to time.
    Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
    I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

    Comment


    • #3
      Like pp said, it varies. Our confirmation order only requires that we notify the trustee of any decrease in income or loss of employment. According to our attorney, they don't care about your income once you're filed as long as you make all of your payments. He told dh to feel free to work as much overtime as he wanted and it wouldn't matter at all! Now if I could just convince dh to work the overtime--ANY overtime--we'd be in awesome shape. lol.
      Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
      0% payback to unsecured creditors, 56 payments down, 4 to go....

      Comment


      • #4
        I hope my income doubles :-p
        19% dividend

        Comment


        • #5
          Anyone in a Chapter 13 needs to know that your finances are not under your control during the time you file until the time you are discharged - your trustee controls your finances. When there is any change in income (increase or decrease) or if one receives an inheritance, hits the lottery, gets a bonus, raise, etc., etc., contact your attorney right away and report the matter. Not to do so risks the dismissal of your Chapter 13. The trustee at any time during a Chapter 13 can request financial information for any reason whatsoever even if they do not ask for your tax return copies each year. Always check with your attorney and note that what one person is able to do on this forum doesn't mean the other person can.
          _________________________________________
          Filed 5 Year Chapter 13: April 2002
          Early Buy-Out: April 2006
          Discharge: August 2006

          "A credit card is a snake in your pocket"

          Comment


          • #6
            Thanks for the information. I had a feeling it would vary by district. I also figured we would have to keep the trusteee in the loop with any changes too. I was just wondering if we would ever be allowed to try to accumulate any money during the 5 years or not. Guess we will play it by ear.

            Comment


            • #7
              Originally posted by highlife View Post
              Thanks for the information. I had a feeling it would vary by district. I also figured we would have to keep the trusteee in the loop with any changes too. I was just wondering if we would ever be allowed to try to accumulate any money during the 5 years or not. Guess we will play it by ear.
              Yes, how does a Chap 13 give one a "fresh start" if you can't ever SAVE any money for an emergency. Dave Ramsey advocates $1000 for an emergency fund (roof repairs, car tires, fridge goes out, etc.) I'm so hoping I can just go the 7 and be done and THEN get my fresh start & do things differently.

              Comment


              • #8
                As long as your attorney puts together a realistic plan and you learn to budget well and live within your means, you can easily save money during your chapter 13--in fact you will HAVE to save money each month to pay for annual expenses that pop up. For example, you are allowed to allocate car maintenance/tags in your budget. Clearly, that isn't a monthly expense so it is IMPERATIVE that you learn to set that money aside each month so that when the expense does arise, the money is available. Same thing with medical, home maintenance, etc. We are on a very very tight budget (WAY below IRS standards claimed on schedule J) and have already been able to set aside a couple thousand dollars for annual expenses or an emergency. It's all about planning and learning to live within your means...
                Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
                0% payback to unsecured creditors, 56 payments down, 4 to go....

                Comment


                • #9
                  Thanks for taking the time to reply & share your experience & glad to hear its working for you, but I'm still skeptical in that I've read the odds of a completion of 13 are not good. I have a great attorney and I'm really hoping that we can go 7 - like in a loan mod: Hoping for the best and preparing for the worst!

                  Comment


                  • #10
                    One other perspective to take regarding the extra income. Yes, the trustee would take a large percentage (if not all) of the increase but....doesn't that payoff your Chap 13 balance sooner?? instead of 5 years...perhaps you'd be done in 3 years. Just a thought.

                    Comment


                    • #11
                      Originally posted by mathom1 View Post
                      One other perspective to take regarding the extra income. Yes, the trustee would take a large percentage (if not all) of the increase but....doesn't that payoff your Chap 13 balance sooner?? instead of 5 years...perhaps you'd be done in 3 years. Just a thought.
                      That's what I was wondering. If sooner, I don't have a problem. But I was worried that if you agree to say 50% payment, trustee decides in a year or two that you can pay more & they raise it to 100% Once you are confirmed, the trustee can't readjust the debts at a higher pay-off than the originally agreed upon can they?

                      Comment


                      • #12
                        Originally posted by mathom1 View Post
                        One other perspective to take regarding the extra income. Yes, the trustee would take a large percentage (if not all) of the increase but....doesn't that payoff your Chap 13 balance sooner?? instead of 5 years...perhaps you'd be done in 3 years. Just a thought.

                        Doesn't work that way...any extra income would be distributed to creditors over and above the confirmed percentage. Does not shorten one's confirmed plan.
                        _________________________________________
                        Filed 5 Year Chapter 13: April 2002
                        Early Buy-Out: April 2006
                        Discharge: August 2006

                        "A credit card is a snake in your pocket"

                        Comment


                        • #13
                          Wow...ok, I was under the wrong impression. I thought the agreed upon balance was fixed and figured if you could reach the payoff sooner...then you would be done sooner. My mistake..sorry

                          Comment


                          • #14
                            Originally posted by Flamingo View Post

                            Doesn't work that way...any extra income would be distributed to creditors over and above the confirmed percentage. Does not shorten one's confirmed plan.
                            I noticed on your signature it says "early buyout". Does that mean that you paid all the debts off at 100%

                            You were successful with your 13, was it absolutely hideous to live under some trustee's thumb for almost 5 years? How come a staggering percentage never make it all the way through a 13?

                            Another thing I'm really annoyed about is some of the unsecured creditors padded my final balance with totally bogus fees. Will this be a part of the pay-off? Their junk fees? Or does the judge/trustee make them give an ACTUAL accounting breakdown of the debt and they decide the correct balance?

                            I've spent all my time learning about a 7 and know nothing about a 13, other than the idea of living under a trustees thumb for the next 5 years is totally unpalatable.

                            Is it possible to maneuver or pull out of a 13 along the way (dismiss it eventually) and negotiate with the creditors for a lower balance? In other words, pull the plug on the trustee?

                            Otherwise, I'm just thinking we'll stop all second job activities and my employer is looking for cut-backs in hours - then I might meet the 7 and be done with this whole ordeal.

                            Comment


                            • #15
                              Originally posted by curiouscat View Post
                              I noticed on your signature it says "early buyout". Does that mean that you paid all the debts off at 100%

                              You were successful with your 13, was it absolutely hideous to live under some trustee's thumb for almost 5 years? How come a staggering percentage never make it all the way through a 13?

                              Another thing I'm really annoyed about is some of the unsecured creditors padded my final balance with totally bogus fees. Will this be a part of the pay-off? Their junk fees? Or does the judge/trustee make them give an ACTUAL accounting breakdown of the debt and they decide the correct balance?

                              I've spent all my time learning about a 7 and know nothing about a 13, other than the idea of living under a trustees thumb for the next 5 years is totally unpalatable.

                              Is it possible to maneuver or pull out of a 13 along the way (dismiss it eventually) and negotiate with the creditors for a lower balance? In other words, pull the plug on the trustee?

                              Otherwise, I'm just thinking we'll stop all second job activities and my employer is looking for cut-backs in hours - then I might meet the 7 and be done with this whole ordeal.
                              I am an "Old Law" filer...that means that I filed prior to the "New Law" that came into effect in October 2005. Under the "Old Law," if one was able to do so, one could "buy out" early from one's Plan under the confirmed percentage rate when one successfully hit the 36 month mark in their Plan. Under the "New Law," that was eliminated and there are no early buy outs unless one buys out at 100% of their debts, not the confirmed amount.

                              Our confirmed Plan was 53%...it was 64% after the trustee took some of my husband's inheritance when my FIL passed away almost two years into our Plan. The extra funds were distributed among our creditors over and above the confirmed percentage.
                              _________________________________________
                              Filed 5 Year Chapter 13: April 2002
                              Early Buy-Out: April 2006
                              Discharge: August 2006

                              "A credit card is a snake in your pocket"

                              Comment

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