Increase in Income

[eap82]

I'm still waiting on my confirmation so I do not have any idea what my trustee's rules are on this. Assuming I have more than a 10% increase in salary, do I notify the trustee? What if I don't and wait until I file my tax returns to see if they notice? Will they want more money retroactively or do they just change my payment amount when they do notice? I'm looking at getting a side job, not to make more money per say because I know it will all just go towards my plan, I'm doing it because it's a great experience and will open some doors for my career. Any thoughts?

[justbroke]

I'm still waiting on my confirmation so I do not have any idea what my trustee's rules are on this. Assuming I have more than a 10% increase in salary, do I notify the trustee?

Does your plan require you to provide a copy of your tax return to the Trustee very year? If so, you don't need to do anything. However, if you get a significant raise you may want to let your attorney know and they'll inform you on whether to notify the Trustee.

What if I don't and wait until I file my tax returns to see if they notice?

Only about 10% of Chapter 13s have a Trustee-initiated change of payment. This means that 90% of the cases have not a single modification of the plan payment even with modest salary increases. The Trustee expects that people receive modest increases in salary to cover inflation and other costs of living adjustments. That's why we use the 10% as a gauge, but it's a totally arbitrary number. Some Chapter 13 Trustees don't care what happens, so long as you make your payments on time.

Will they want more money retroactively or do they just change my payment amount when they do notice? I'm looking at getting a side job, not to make more money per say because I know it will all just go towards my plan, I'm doing it because it's a great experience and will open some doors for my career. Any thoughts?

A second job could complicate things as it could be more than 10%. If this second job is consistent then your attorney will likely advise you to either not take the job or that they may need to notify the Trustee. (This is if you're not in a 100% plan or you actually already have positive disposable monthly income.)

Each case is too fact-specific and the Chapter 13 Trustee matters as well. If you're under-the-median, and filed only to save property, then no one would likely care about additional income from a second job. It will still depend on your overall picture, your district and your Chapter 13 Trustee.

I've gone through my Chapter 13 with about an increase, overall of about 35% from the start to the end. The Trustee saw my annual tax returns. I get about 3% each year for cost-of-living and received one 15% bump in pay one year.

[brokenurse]

It is in our plan that we have to report any and all increases over 10% to our attorney. My husband just had a pretty big promotion at the end of 2020 and I dabbled in real estate so we reported all of that. To date, I have not heard from my attorney if/when our plan will be changing. We are in our final year, though, pretty much all of our expenses have increased and we had some major car and home repairs, so maybe they won't increase our plan payment. We are already at 100% and have been for over a year.

Before we got to a 100% plan, our payment increased 4 different times. If we had an extra $5, the trustee wanted it. I would plan for the worst and hope for the best.

[justbroke]

If a debtor is in a 100% plan, any increase in income does not matter. In a 100% plan, the debtor does not need to pledge "all disposable income" to the plan because the debtor is paying 100% to the unsecured creditors.

(Please take note that some Chapter 13 Trustees, and even some debtor attorneys, will say that a debtor, in a 100% plan, must pay in all disposable monthly income (DMI). That's simply not the case. The bankruptcy code is clear (in 11 USC 1325) that a debtor who proposes a plan to pay all claims does not need to propose such plan pledging DMI. The debtor simply needs to pay 100% of all (allowed) claims. Of course if you pay DMI into the 100% plan you could be done early. My position is that "life happens" and there is no reason for the debtor to give up all their DMI in a 100% plan.)

[brokenurse]

If a debtor is in a 100% plan, any increase in income does not matter. In a 100% plan, the debtor does not need to pledge "all disposable income" to the plan because the debtor is paying 100% to the unsecured creditors.

When we first learned of the promotion I emailed our attorney about it, whose exact words were "You can probably expect your payment to increase." Now, maybe I haven't heard back from her because she forgot we were at 100% and has realized it, but I am still worried that she is going to come back with bad news.

[justbroke]

Exactly. I would refuse to pay more (actual DMI) if I were in a 100% plan. I would send in "extra" to be done early, only after I established a 6-month cash reserve in case life happens.