When you file for Chapter 13 bankruptcy, every dollar you make will impact your case. As such, if you experience a change in your income, regardless of whether or not it increases or decreases, it can impact the payment plan you’re on. If this reflects your circumstances, the following blog explores what you should know about these matters, including the importance of discussing your situation with an experienced Montgomery County Chapter 13 bankruptcy lawyer to help you understand the impact these changes can have on your case. Additionally, you’ll learn the consequences you can face if you fail to report changes in income to the bankruptcy court.
Do I Need to Report Income Changes During Bankruptcy?
When your income changes, whether it increases or decreases, you are legally obligated to inform the court.
While many are eager to report decreases in their income in the hopes of lowering their monthly payments, many assume that the court will not discover increases in their income, thus allowing them the opportunity to continue their payment plan while keeping the extra funds. However, this is not the case. Your bankruptcy trustee will examine a multitude of documents over the course of your plan, and if there are inconsistencies in your case, the court can take action against you.
In some instances, failure to report an income change can result in the conversion of your case from Chapter 13 to Chapter 7, placing certain assets at risk of liquidation. In other instances, your case may be dismissed, meaning the court will close your case without granting you the discharge of debts. If the court believes you have deliberately hidden the funds, you can face bankruptcy fraud charges.
How Will an Income Change Impact Chapter 13?
In the event your income decreases, whether due to job loss or reduced hours, you can file a motion to request a modification to your plan. For many individuals, this will simply recalculate your payment plan, ultimately reducing how much you owe to your creditors each month. However, in some instances, you may find that permanent, severe changes in income may mean that changing from Chapter 13 to Chapter 7 is in your best interest. However, you’ll need to pass the means test in order to qualify.
If your income increases as a result of a raise, promotion, or obtaining secondary employment, you may assume that your plan will automatically change. However, modest increases in income are not always grounds to increase how much you owe each month. Significant increases, on the other hand, will generally result in an increase as your disposable income has grown.
As you can see, changes in your income can have significant impacts on your bankruptcy case. That is why it’s in your best interest to connect with an experienced Pennsylvania bankruptcy attorney to help you understand your legal options and guide you through this process so you can seek the best possible outcome. At Mudrick & Zucker, P.C., our firm knows that bankruptcy can be overwhelming, which is why we are here to assist you. When you need help, contact our firm to learn how we can fight for you.
