This idea that bankruptcy requires turning over all of your property is a myth, particularly in Chapter 13 cases. If you are considering bankruptcy and need someone to help you separate the myths from the facts, contact an experienced bankruptcy attorney.
San Diego Chapter 13 Bankruptcy Lawyers
If you have a steady income and are having trouble keeping up with your bills on a month to month basis, Chapter 13 bankruptcy may be a good option to consider. It allows you to consolidate all your debt into one payment, often at better rates, and pay back all or part of that debt over the course of three to five years. Once you file for bankruptcy, your creditors must immediately stop all debt collection, foreclosure and repossession activity. This means that you won't receive any more harassing phone calls and you won't have to worry about who is calling every time the phone rings.
Contact our office today to learn more about Chapter 13 bankruptcy and how it can help you get a fresh start. Our attorneys are available to help you during regular business hours and by appointment.
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Bankruptcy Legal Group offers clients combined experience of over 30 years in California bankruptcy law and helping them find the right solution to their financial challenges. Contact our office today to learn more.
Learn more about the advantages of filing for Chapter 13 bankruptcy and how you can get relief from your financial burdens. Contact the Bankruptcy Legal Group today.
Effects of a Salary Increase on a Wage-Earner Plan Under Chapter 13
When a Chapter 13 debtor enters into a wage-earner plan, he or she commits the next three years’ disposable income — that portion of the debtor’s income not required to meet the necessary needs of the debtor and his or her dependents — to the repayment of debt. Often, a debtor’s income will increase after the plan is in place, and the question arises as to what becomes of this increase in income. A lawyer at Bankruptcy Legal Group in San Diego can answer these and other Chapter 13 questions as they arise, providing information, reassurance and competent and zealous advocacy throughout the bankruptcy process.
The Debtor May Be Allowed to Retain the Increase in Income Unless the Increase is Significant and There Are No Offsetting Increases in Expenses.
The Bankruptcy Code requires that the debtor contribute his or her projected disposable income toward the plan payments for the first thirty-six months of the plan. Although the Code imposes this requirement only when the trustee or a creditor demands it, in reality the trustee always requires it, at least at the beginning of the plan. Whether changes in salary will change the payment plan depends on a complete consideration of all of the relevant circumstances.
It is possible that a debtor's income could change after he or she files the petition, but before the court has confirmed the plan, which makes it binding on the creditors. A debtor may change jobs, get a raise or start a second job. During the time between filing and confirmation, the trustee will watch the debtor's disposable income to make sure that the payments fit with the debtor's income level and make any changes to the plan.
If the debtor’s income changes within the first three years (36 months) of the repayment plan, it may not be necessary to make changes to the payment amounts. However, if the debtor's income increases by a significant amount, the trustee may ask that payments be adjusted accordingly. The trustee generally is not responsible for closely monitoring the debtor’s income. After three years of a confirmed plan, if the plan even extends that long, there is no specific requirement in the Bankruptcy Code that disposable income be contributed to the plan, so an increase in income at that point in time would probably make little difference.
The trustee will consider not only the salary increase, but also whether there has been a corresponding increase in disposable income, on which the payments are based. Disposable income is the amount of the debtor’s salary that is left after deducting all reasonable living expenses. If the debtor’s expenses increase along with his or her salary, the debtor's disposable income may not change and the payment plan will not change either. If the debtor's disposable income increases by a substantial amount, the trustee may ask for the payments to also increase. If the plan goes beyond 36 months, the increased payments may actually reduce the length of the plan. This would mean that the debtor has paid off his or her debts sooner and would receive a discharge earlier.
Conclusion
It could be disheartening to a debtor to receive a raise and have to turn it all over to the trustee for debt repayment, but that is not always the effect of a salary increase. A lawyer at Bankruptcy Legal Group in San Diego can put your mind at ease when questions about a Chapter 13 bankruptcy arise.
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