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.

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.

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.

Get a free, confidential bankruptcy evaluation. Learn More

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.

Get a free, confidential bankruptcy evaluation. Learn More
Options When a Trustee Files a Motion to Dismiss a Chapter 13



Related articles

How Much of Your Tax Refund Do You Have to Give the Bankruptcy Trustee in Illinois?

Filing for bankruptcy in Illinois, as elsewhere, means petitioning a federal bankruptcy court for debt relief and protection. You can either surrender assets to repay creditors, through a Chapter 7 proceeding, or set up a repayment plan, through a Chapter 13 bankruptcy. If you have a refund coming from the IRS, you'll need to inform the court-appointed trustee handling your case. In some instances, you must surrender the refund; in others, you may be able to keep all or part of it.

What Happens When Chapter 13 Is Dismissed?

Chapter 13 bankruptcy allows you to create a three- to five-year repayment plan to catch up on your debts. If your case is dismissed, either by you or the bankruptcy court, prior to completion of the repayment plan, you will not receive a bankruptcy discharge, which erases the debts covered by your bankruptcy case and makes them unenforceable by your creditors.

How to Amend Chapter 7 After it Has Been Filed

Filing for bankruptcy requires you to honestly state information regarding your financial situation, including your debts and current financial status. If you've made an error or circumstances have changed, you can amend the information contained in your filed bankruptcy petition or one of the bankruptcy schedules to include the omitted information. According to Rule 1009(a) of the Federal Rules of Bankruptcy Procedure, you can amend your bankruptcy paperwork at any time until the case is closed.

Related articles

How to Drop a Bankruptcy

Filing for bankruptcy is a last resort attempt to improve your financial health. Bankruptcy protects you from lawsuits ...

Defaulting on Chapter 13

Chapter 13 is called a wage earner's bankruptcy for a reason -- you need enough disposable income each month after ...

What Happens If I Don't Pay My Chapter 7 Overages?

Under Chapter 7 bankruptcy, your assets are valued by a court-appointed trustee and sold to pay your creditors. You are ...

Can One Convert From Chapter 7 to 13 Bankruptcy?

If your debts are running high and your income isn't enough to meet your expenses, you can petition for bankruptcy ...

Browse by category
Ready to Begin? GET STARTED