Four Reasons For A Chapter 13 Payment Increase

Posted on | November 21, 2010 | Comments Off on Four Reasons For A Chapter 13 Payment Increase

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When a debtor files Chapter 13 bankruptcy, they are required to commit to a repayment plan that distributes their “excess” income to creditors.  While for the most part Chapter 13 bankruptcy repayment plans remain the same, there are several reasons why a repayment plan could increase.

  1. An increase in salary: Chapter 13 bankruptcy plans take place over the course of a 3 to 5 year period. Quite naturally during that time a debtor’s salary can increase or decrease. If their salary increases during the repayment period of the Chapter 13 bankruptcy, the bankruptcy trustee may request that the debtor pay the extra income to the creditors.  On the other hand, if the debtor’s salary decreases, they can request that their payments be decreased or if they qualify, they can request an emergency discharge.
  2. Domestic support obligations have ended: If a debtor begins a Chapter 13 bankruptcy repayment plan while paying child support or alimony and that support obligation ends during the course of the bankruptcy, the trustee may request that the debtor commit the freed up money to the repayment plan.
  3. The termination of a car payment during Chapter 13 bankruptcy: While Chapter 13 bankruptcy takes into account the cost of paying for a car note, if the debtor pays off their car note while in bankruptcy, the bankruptcy trustee may request that the debtor take that excess money and use it to repay creditors.
  4. The repayment of a retirement plan loan has ended: Many debtors have borrowed from their retirement accounts before filing bankruptcy and continue to repay the loan during their Chapter 13 bankruptcy repayment period. However, if they finish repaying the retirement plan loan during the course of the bankruptcy repayment period, they may be required to use that extra money to repay creditors in their Chapter 13 bankruptcy.

Be very careful when you chose your bankruptcy attorney.  Most big firms only do Chapter 13’s (that is how they make their money) and will NEVER tell their clients about the possibility of a payment increase in their plan.

PH

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