Living with the inability to pay debt and your basic living expenses can be overwhelming, but millions of people are able to find relief through bankruptcy. During a chapter 13 filing, your attorney will work with creditors on your behalf to design a monthly repayment plan for these debts. While based on your current income and living expenses, the monthly payment will be set during the initial proceedings. Once filed, you must understand when and if to notify your attorney about an increase in your income. This guide will help explain the process of chapter 13 repayments and what to do if you receive a raise or additional income.
During the consultation, your attorney will discuss the best option for reorganizing your debts using a chapter 13 filing. This will involve a repayment plan, broken down into monthly payments over a period of up to five years. The total monthly payment will go towards all of your outstanding debts, discussed with your attorney.
The monthly payment will be based on a few factors, including your monthly income after taxes, health insurance and basic living expenses. This is known as your disposable income. In most cases, this monthly plan will be sufficient for paying off a portion of the total debt, but not the entire balance.
Once you enter into chapter 13 bankruptcy and begin making your monthly payments, you will need to provide your attorney will an income statement each year. This statement will be given to the courts, who will then determine if you are still capable of making your monthly payments.
If your income has decreased after filing, the monthly payments can be renegotiated and decreased. On the other hand, an increase in your income will require a renegotiation and possible increase, as well.
It is also important to note that if your income has decreased or increased before the annual report is given to the courts, you must notify your attorney.
After an increase in your income, the courts will decide if your monthly payment needs to increase. An increase in your monthly payment will only occur if your income has increased significantly. However, your attorney is legally obligated to notify the courts of any income changes before and during a chapter 13.
To learn more about chapter 13 and other bankruptcy options, contact Collins & Arnove in the Allen, TX, area at 972-516-4255.
Collins & Arnove | Bankruptcy Allen TX | 972-516-4255