How to Report Income Changes to the Chapter 13 Trustee

By Tom Streissguth

By petitioning for a Chapter 13 bankruptcy, you are promising you'll try to clear at least a portion of your outstanding debts. Chapter 13 allows you to keep assets you would have to surrender in a Chapter 7 case; rather than seizing your non-exempt goods, the bankruptcy trustee oversees a repayment plan. The plan is based on your income, so keeping the trustee current with any changes to that income is essential.

By petitioning for a Chapter 13 bankruptcy, you are promising you'll try to clear at least a portion of your outstanding debts. Chapter 13 allows you to keep assets you would have to surrender in a Chapter 7 case; rather than seizing your non-exempt goods, the bankruptcy trustee oversees a repayment plan. The plan is based on your income, so keeping the trustee current with any changes to that income is essential.

Debtor and Trustee

The trustee who administers your Chapter 13 plan is responsible for setting payments that match your income level and ability to pay. In turn, you as the debtor must keep the trustee informed about any changes to your income. If you lose or change your job, receive a substantial raise, or have a cut in your hours or wages, you must report it to the trustee while the plan is in effect.

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Threshold Changes

The repayment plan and bankruptcy documents will give you specific instructions on the circumstances you need to report and how to do so. It's common for a trustee to require a report if your income changes by 10 percent (up or down) from the income you reported on Schedule I when filing the case. You report by mailing a letter along with a supporting document, such as a pay stub, to the trustee's business address.

Request for Plan Change

If you face steep expenses or lose income while dealing with a repayment plan, you can request a modification of the plan by the bankruptcy court. If you are facing a one-time expense, such as the repair of an appliance or car, this change can be temporary. The priority is to stay current on secured loans; if you default, the creditors can seize your property or foreclose on your home. While you are covered by a Chapter 13 repayment plan, you need written permission from the trustee to borrow any money.

Taxes and Windfalls

Chapter 13 trustees also require copies of your tax returns, which they examine for evidence that your income has changed. If you are due a tax refund, then the trustee can divert that money to pay your creditors. If you receive any kind of a windfall, such as a salary bonus or inheritance, the trustee may require higher monthly payments or the repayment of your debts in full.

Selling Property

While the repayment plan is in effect, you need permission from the bankruptcy court to sell any property, secured or unsecured. The court and the trustee reserve the right to seize the proceeds of a sale to satisfy your creditors. If you fail to keep the trustee current on a sale of property or any other changes in your financial situation, the bankruptcy can be dismissed -- meaning you're back where you started and your debts are again fully collectible.

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How to Reduce the Payments to the Court Trustee in a Bankruptcy

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Bankruptcy Exemption Requirements

If your debts are out of control and you have little hope of catching up on the bills, you have the option to file for bankruptcy protection. The federal bankruptcy code allows you to file under Chapter 7 or Chapter 13 of the code. In a Chapter 7 bankruptcy filing, a court-appointed trustee seizes your non-exempt property to repay your debts. In a Chapter 13 filing, the trustee sets a repayment schedule, and you are allowed to keep your property. Exemptions are an important consideration in both forms of bankruptcy.

How Many Times Can You File Chapter 13?

Sometimes life can go from bad to worse. You file for Chapter 13 bankruptcy, dig out from under your debts, then a short time later, you lose your job or something else goes wrong. Your fresh start isn't so fresh anymore, and you need to file again. There's no limit to the number of times you can file for Chapter 13 protection, but you can only do it so often.

How to File Chapter 13 in New Hampshire

Chapter 13 bankruptcy can help you, as a debtor, prevent home foreclosure, make up missed car or mortgage payments, and pay back taxes. It can also stop the interest from accruing on your tax debts -- including local, state and federal taxes -- while allowing you to keep certain valuable property. Bankruptcy is governed by federal laws, but certain aspects are unique to New Hampshire. For example, New Hampshire residents must file their bankruptcy cases in the U.S. Bankruptcy Court for the District of New Hampshire, located in Manchester.

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