Income for Payment Plan?

[sisterfunkhaus]

When you file chapter 13 and come up with a payment plan, do they base it on your last 6 months income like they do on the means test for chapter 7 or do you propose a plan based on your current and future expected earnings? I don't know if this has been asked before so please don't jump on me if it has. Thanks

[treehugger1]

This has been discussed here, but I can't recall if there was a set response. One form uses the average of six months and the other consider "projected." My legal counsel stated we had to use the prior six months. I was trying to stall as I was hoping (LOL) that my incoem would decrease over a few months due to changes in overtime/overload pay. I would guess that if your inceom is steady, you will need to use the average of the prior six months. If not, you might be able to prove or show a reason to consider "projected." I have friends who are teachers and are paid out over ten months. I have to wonder how a BK 13 income would be calculated in their cases.

[HHM]

When you file your petition, you generally use the average of the prior six months. However, at anytime in the future, you will have the option to "modify" your plan (assuming there is room to modify) if your income goes down, or even possibly convert the case to a chapter 7 if something drastic happens.

The only time you use projected income is if you MUST be in a Chapter 13 and can prove that the income will reliably accrue and you need that income to qualify for the Chapter 13.

[sisterfunkhaus]

Our issue is that DH is getting a bonus of $2000 in December that we are both using for needed dental work. He is a teacher and it isn't a part of his normal salary. We would be screwed and unable to make a payment that is based on that bonus being a part of our normal income. He's getting another in May that we don't mind handing over to the court, but basing what we can pay in the future on those bonuses would make our payment plan literally impossible. His pacheck stub clearly spells out what his normal salary is and that those are bonuses. We aren't filing until after the first bonus b/c we have to use that $$$ for dental work that we both MUST have.
We will most likely file for 13 and then convert to 7 in November of next year after all of the bonuses have fallen off.

Does anyone else feel like there's some weird law of the universe that makes it so that right before you need to file bankruptcy you get these bonuses and things that you would never have gotten previously just to screw everything up?? I swear. In all of the years we have both been working this has never happened. Now that we want to file we are getting bonuses out the wazoo.
UGH>

[HHM]

Well, if you file after he recieves the bonus, then it will be averaged in to your disposable income calculation.

Also, there is some flexibility in Chapter 13 plans to deal with one time increases in income. So you are not forced to "average" the bonuses on a monthly basis. Instead, you can write a plan that takes them into consideration and you make a larger, one time payment at certain times.

[sisterfunkhaus]

Another question. I do home childcare and have a teacher who does not come or pay in the summer. My income will go down considerably during those months. I will still have some disposible income to make my payment with, it will just be reduced by around $800 a month for two months or so. How do they deal with income reduction? It's just temporary, but it is there none the less.

[HHM]

Another question. I do home childcare and have a teacher who does not come or pay in the summer. My income will go down considerably during those months. I will still have some disposable income to make my payment with, it will just be reduced by around $800 a month for two months or so. How do they deal with income reduction? It's just temporary, but it is there none the less.

You need more of a practical solution for that one. As for the plan, you average income over 12 months, so the decrease does get factored in to some degree. i.e. if over 9 months you make a total $7,200, if you average that over 12 months, you earn $600 per month (even though you actually earn $800 per month during the months you are working), so, you calculate your chapter 13 plan based on the that amount of monthly income. As a practical matter, you will need to force yourself to save the extra money, during the nine months you are earning income, so that you can make your plan payments during the months you do not have income.