Wednesday, 09 July 2014 00:00

EFFECTS OF A SALARY INCREASE ON A WAGE-EARNER PLAN UNDER CHAPTER 13

Written by
Rate this item
(0 votes)

When a Chapter 13 debtor enters into a wage-earner plan, he or she commits the next three years' disposable income — that portion of the debtor's income not required to meet the necessary needs of the debtor and his or her dependents — to the repayment of debt. Often, a debtor's income will increase after the plan is in place, and the question arises as to what becomes of this increase in income. A lawyer at D.J. Rausa, Attorney at Law in San Diego, San Diego, can answer these and other Chapter 13 questions as they arise, providing information, reassurance and competent and zealous advocacy throughout the bankruptcy process.

The debtor may be allowed to retain the increase in income unless the increase is significant and there are no offsetting increases in expenses.

The Bankruptcy Code requires that the debtor contribute his or her projected disposable income toward the plan payments for the first three years (36 months) of the plan. Although the Code imposes this requirement only when the trustee or a creditor demands it, in reality the trustee always requires it, at least at the beginning of the plan. Whether changes in salary will change the payment plan depends on a complete consideration of all of the relevant circumstances.

It is possible that a debtor's income could change after he or she files the petition, but before the court has confirmed the plan, which makes it binding on the creditors. A debtor may change jobs, get a raise or start a second job. During the time between filing and confirmation, the trustee will watch the debtor's disposable income to make sure that the payments fit with the debtor's income level and make any changes to the plan.

If the debtor's income changes within the first three years (36 months) of the repayment plan, it may not be necessary to make changes to the payment amounts. However, if the debtor's income increases by a significant amount, the trustee may ask that payments be adjusted accordingly. The trustee generally is not responsible for closely monitoring the debtor's income. After three years of a confirmed plan, if the plan even extends that long, there is no specific requirement in the Bankruptcy Code that disposable income be contributed to the plan, so an increase in income at that point in time would probably make little difference.

The trustee will consider not only the salary increase, but also whether there has been a corresponding increase in disposable income on which the payments are based. Disposable income is the amount of the debtor's salary that is left after deducting all reasonable living expenses. If the debtor's expenses increase along with his or her salary, the debtor's disposable income may not change and the payment plan will not change either. If the debtor's disposable income increases by a substantial amount, the trustee may ask for the payments to also increase. If the plan goes beyond 36 months, the increased payments may actually reduce the length of the plan. This would mean that the debtor has paid off his or her debts sooner and would receive a discharge earlier.

Speak to a bankruptcy lawyer

It could be disheartening to a debtor to receive a raise and have to turn it all over to the trustee for debt repayment, but that is not always the effect of a salary increase. A lawyer at D.J. Rausa, Attorney at Law in San Diego, CA, can put your mind at ease when questions about a Chapter 13 bankruptcy arise.

Copyright © 2014 D.J. Rausa, Attorney at Law.

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

Read 2051 times
D.J. Rausa

With over 21 years of experience as a consumer bankruptcy attorney, D.J. Rausa stays on the cutting edge of Bankruptcy and Student Loan Law which enables him to provide vital information to his clients.

Google+

www.debtdoc.com

Initial Free Consultation

  1. Your Name(*)
    Please let us know your name.
  2. Your Email(*)
    Please let us know your email address.
  3. Phone(*)
    Please write a subject for your message.
  4. Message(*)
    Please let us know your message.
  5. Invalid Input
  6. Enter Code
    Invalid Input

Thank you DJ!

I had no idea where to start with my bankruptcy and process. After my first meeting with DJ I felt confident that things were going to go well. He helped guide me through the entire process and time. 

He's very professional and courteous, thorough and extremely knowledgeable. 

I would recommend anyone that needs a bankruptcy lawyer/ student loans. 

Don't have a second thought when choosing DJ Rausa!

stars
Posted by a client - February 15, 2016

AVVO Lawyer Rating is Superb!

Respected Legal Source

D.J. Rausa interviewed by the Wall Street Journal for article on Bankruptcy and Student Loan Debt.

D.J. Rausa is recognized as a legal expert in Student Loan Debt Resolution and the associated Bankruptcy Laws.

Read what D.J. recently told The Wall Street Journal regarding the probable rise in Student Loan Debt Resolution through Bankruptcy.

Client Testimonial

To whom it may concern,
Mr. Rausa is extremely knowledgeable with the complexities of Federal Student Loans.
I went from a thriving career to full medical disability, ending with an SSDI placement. Unfortunately, I lost everything and became unable to continue making the student loan payments, so it was in deferment for over five years. When the SSDI settled I tried to negotiate an affordable payment plan with the loan holders but they refused my efforts, instead demanding over twice the amount I could afford.
I contacted Mr. Rausa and found him to be courteous, responsive and quick to assess my situation. He was sure he could help and took time to answer all questions, which relieved much anxiety. Within months he successfully resolved the debt! With much confidence, I highly recommend Mr. Rausa.
Please contact me if you have any additional questions.
Sincerely,
 CJWaldenSignature
CJW
Websites with bunus at Bingo gbetting.co.uk/bingo games.