"side gigs" and Disposable Income

[BlkLabMom]

I am 9 months into my Chapter 13 bankruptcy. I feel like it's been a whirlwind and, at times, very confusing and frustrating, as I try to figure out the "particulars" of my trustee and what is required of me. (side rant about how ridiculous it seems to me that some of this stuff seems to depend on the whim of a trustee instead of a standard practice across all Chapter 13 debtors)

I'm on, what I think is a 21% plan and I'm having real difficulty with the budget since my house needs work and the longer I wait on some things, the more damage is done and the more it will cost. Not to mention home repairs have skyrocketed due to materials and labor costs and supply chain etc.

I was thinking about picking up a side gig, like shopping for Shipt (I believe if you make over $600 doing this they send you a 1099 at the end of the year) and I will need to pay taxes on that income. Do you think it is likely that the trustee will look at something like that and determine it's disposable income and raise my monthly payments? Will they take the whole increase since my plan is only at 21%? Is it basically not even worth it?

I know my lawyer is the best person to answer this question but I am conflicted about talking to them because I feel like sometimes I'm getting the narrowest most conservative answer whereas other times I feel like I'm getting a "here is how we can make this work for you" kind of answer. Seems to be a team (3 different lawyers) and the two that set up my case did very well at negotiating and establishing a good plan, but the third, who is the one that communicates with me the most doesn't seem as knowledgable and frankly, seems like I'm getting canned responses instead of nuanced ones.

Looking forward to your responses,

~blklabmom

[justbroke]

Welcome to BKForum!

I am 9 months into my Chapter 13 bankruptcy. I feel like it's been a whirlwind and, at times, very confusing and frustrating, as I try to figure out the "particulars" of my trustee and what is required of me. (side rant about how ridiculous it seems to me that some of this stuff seems to depend on the whim of a trustee instead of a standard practice across all Chapter 13 debtors)

A Chapter 13 Plan is individualized and based on that particular person. That's why a Chapter 13 can vary between debtors in how they are treated.

I'm on, what I think is a 21% plan and I'm having real difficulty with the budget since my house needs work and the longer I wait on some things, the more damage is done and the more it will cost. Not to mention home repairs have skyrocketed due to materials and labor costs and supply chain etc.

Chapter 13s, while they can deal with some issues, aren't super flexible. If you have a true emergency then you can ask your attorney to seek an abatement of a portion of the payments for several months so that you can use the money to direct at necessary repairs. Since you have a home, I'll assume a mortgage. You will still be on the hook for paying that back into the plan (... in most cases by increased plan payments spread out over the remainder of the plan).

You can generally forget about maintenance items in a Chapter 13 unless you bakes in maintenance into your budget. I baked in $300/month to maintain my home.

I was thinking about picking up a side gig, like shopping for Shipt (I believe if you make over $600 doing this they send you a 1099 at the end of the year) and I will need to pay taxes on that income. Do you think it is likely that the trustee will look at something like that and determine it's disposable income and raise my monthly payments? Will they take the whole increase since my plan is only at 21%? Is it basically not even worth it?

Your attorney and your plan should indicate whether you need to send in a copy of your tax return each year, and whether you need to surrender any refunds. It is up to the Trustee to determine whether any increase in income is worth having your plan increase.

I know my lawyer is the best person to answer this question but I am conflicted about talking to them because I feel like sometimes I'm getting the narrowest most conservative answer whereas other times I feel like I'm getting a "here is how we can make this work for you" kind of answer.

Your responses are canned likely because that is the answer. If someone asked me what happens if they have an emergency repair, the answer would be template/canned because it's a common question. In some cases a plan can deal with certain issues, and in others the plan cannot support the issue.

The key for Chapter 13 debtors is to always communicate issues, especially financial ones, immediately with the attorney. They can't help until you tell them. You are likely being sent to the third attorney because your questions are not covered by your fee. Most Chapter 13 fees are incurred to get to confirmation. After confirmation the attorney will answer limited questions. Anything with details would require the debtor to pay the hourly rate (typically $250-$500/hr). The fee schedule is just how Chapter 13s work... $4,500-$7,500 (generally) to get an easy to moderate case to confirmation. After that the attorney only "monitors" the case after confirmation. Anything significant will result in a fee. In some cases, the attorney can just bill the trustee for the fees and it will come out of the unsecured pool.

[bornfree2]

I was thinking about picking up a side gig, like shopping for Shipt (I believe if you make over $600 doing this they send you a 1099 at the end of the year) and I will need to pay taxes on that income. Do you think it is likely that the trustee will look at something like that and determine it's disposable income and raise my monthly payments? Will they take the whole increase since my plan is only at 21%? Is it basically not even worth it?
labmom

I dont know anything about Chapter 13, but perhaps as an independent contractor you can deduct a lot if that income with expenses. Again, i dont know anything about Chapter 13 and how it affects the deductibility of income via expenses, but thats certainly something nice about running your own shop and the tax man

[newlife13]

You need a cash side gig. Not that I would have work for cash on the down-low or anything... ;-)

[bornfree2]

You need a cash side gig. Not that I would have work for cash on the down-low or anything... ;-)

"sources of income: pimp" ;)

[flashoflight]

What does your trustee do with the annual tax returns? Do they initiate a plan modification because you got a raise or side gigs? Or are plan modifications initiated by your trustee rare? Some trustees will take a middle ground and require you to timely disclose new or changed employment as part of the terms of your confirmed plan. So ask your lawyer if your specific trustee initiates plan modifications with previous clients. That single question is probably the most succinct way to find out the information you need.

Let's pretend the trustee rarely/never initiates plan modifications (don't assume your trustee will not try to seize your income - verify with your lawyer). Unfortunately, you will be paying the extra income to the creditors if you ever need to do a plan modification unless it is a cash side gig. I would not suggest hiding income that will show up in a 1099 and next year's tax return if you ever need to do a plan modification. Just plan on never, ever doing a plan modification or borrow money if you get a side gig or get a raise/promotion at your day job.

Otherwise, I don't have a solution for you on home maintenance. I built in a $400/month ($4800/year) buffer in my court budget for home maintenance. I turned in receipts from big box stores and plumbers to justify such a large buffer. I have other buffers in my court budget as well. I have a 1% plan so I didn't leave any meat on the bone.

[newlife13]

I babysit and dogsit and sometimes work house parties (bartend, food service). All cash monies or Venmo. FYI: Venmo will 1099 you now, beginning in tax year 2022, so this is not a good workaround.