Income changed during Chapter 13 Payment Plan

[lewmel]

I just filed chapter 13 this august. And my payment is low. I have only made two payments so far and have 58 left! But i am getting an increase in pay this November. After taxes i will be bringing home an additional 600 a month. My lawyer has already maxed out the standard for living expenses, and says that he can not account for such a large pay increase. His advise was to wait as long as i possibly could to file my taxes. I am curious if anyone else has had a pay increase while under chapter 13. And how long did it take for the trustee to find out? Did they take all of your raise? Any info is greatly appreciated!

[arkienurse]

I just filed chapter 13 this august. And my payment is low. I have only made two payments so far and have 58 left! But i am getting an increase in pay this November. After taxes i will be bringing home an additional 600 a month. My lawyer has already maxed out the standard for living expenses, and says that he can not account for such a large pay increase. His advise was to wait as long as i possibly could to file my taxes. I am curious if anyone else has had a pay increase while under chapter 13. And how long did it take for the trustee to find out? Did they take all of your raise? Any info is greatly appreciated!

Are you by chance in a 100% payback? If so, trustee may not raise your payment at all, or if so, only a bit of the increase. Not sure what they will do if you are not in a 100% payback.

[lewmel]

No, I am no where even close to 100%. I was in the hospital for almost a month last year, and the bill totaled over 125K. I am only paying about 25% of that.

[CindyLou]

You do have a few options here. Can you talk with your employer and discuss possibly delaying your increase until 2008? I know where I work they actaully asked us to delay our pay increases voluntarily due to budget problems!!! You might be surprised what they might work out with you! You could even work out with them to roll up your increase into quarterly bonus that starts in March 08??? That would get your confirmed into your 13, get your taxes filed and get you off the trustee's radar.......You still get you money, its just delayed a bit and given to you as a bonus instead of hourly.

Another option if they can't do that is to just decline your increase altogether until Jan 1. I know that sounds crazy, but if you aren't going to get it until the end of Nov. anyway what another 6 weeks. Just tell your employer that you have some serious financial paperwork to fill out and that you need your finances to be consistant until the end of the year and as crazy as it sounds you would like to wait until January 1st to take your increase. Even if they can't give you the money you lose, tell them its ok. Believe me, in the long run, not taking the raise for 6 weeks and maybe losing 800.00 will be well worth not having to revise your plan before its confirmed!!!! I think your attorney if just worried about having to submit your tax return to the trustee and him noticing your increase in income. so, whateve you can do to keep that increase off the books and off your taxes for 07 will be to your advantage so you can do your taxes, get the return in the trustees hand, get confirmed, get off the radar, and move on with life!!!!! Good luck and keep us posted!!

[katze]

Our income increased by about 12% the first year after filing. We have to send the trustee a copy of our income taxes every year. I was sure that we would be hearing from him but here it is almost Oct and not a word. Our lawyer said that if the trustee wants more money then we would hear from him. We will be making payment #24 in Oct with 12 more to go.

[CindyLou]

katze,
I think the difference between you and lewmel is the he is not yet confirmed...he has just filed...so he is at a big risk of having his plan objected before it is confirmed. You are probably fine. You probabaly have one of those trustees that as long as you are making those payments and you don't win the lotto...then you'll be fine. But lewmel has to get confirmed before he/she can coast.

[lrprn]

II am curious if anyone else has had a pay increase while under chapter 13. And how long did it take for the trustee to find out? Did they take all of your raise?

There is a great deal of variation between how Ch 13 trustees will handle pay increases. Most don't pay attention unless you get more than a 10% increase all at once. Is your increase in November going to be that large?

Also, I'm assuming you aren't confirmed yet. Until you get the raise and see it in your paycheck, there's nothing for your lawyer to defend at the confirmation hearing.

Both husband and I have received pay increases since we filed in June 2006. Neither were close to 10%. Our trustee saw the increases on our tax returns for 2006 when our lawyer sent them to him last April. Haven't heard a thing from him. And he just confirmed our Ch 13 case this last Thursday in court.

There's just no way for us to predict what your trustee is going to do. Your lawyer is going to have the best idea of what to expect in your case since he/she's likely seen other cases where this has happened or can ask another bk lawyer in the area if he/she hasn't. Sure hope your trustee is one of those who isn't too worried about what happens after confirmation.

[Granny]

I just filed chapter 13 this august. And my payment is low. I have only made two payments so far and have 58 left! But i am getting an increase in pay this November. After taxes i will be bringing home an additional 600 a month. My lawyer has already maxed out the standard for living expenses, and says that he can not account for such a large pay increase. His advise was to wait as long as i possibly could to file my taxes. I am curious if anyone else has had a pay increase while under chapter 13. And how long did it take for the trustee to find out? Did they take all of your raise? Any info is greatly appreciated!

Just two months of increase probably won't make that much difference to your trustee. She/he will see your tax return for the entire 12 months of 2007 as one figure. She/he will not know if that increase was before the 6 month look back period or after it. If you will bring home an additional 600 per month for 2 months, it will look like an additional 100 per month to the trustee. 600 X 2 / 12 = 100.00

Good luck!

[CindyLou]

Thats' true!! Are you sure he's concerned about your taxes???? When is your 341? When is your confirmation? Are you sure he isn't going to have to provide updated check stubs at your confirmation and that's what he's worried about? Go back and ask more questions and get more specifics.

But then again.....even 100.00 could raise your payment by 100.00 if you are that tight on expenses. I would ask again to see what he is specifically concerned about.

[lewmel]

Thanks to everyone for their input! No i have not be confirmed yet. I went the first meeting and the trustee rejected it for 2 reasons that where her fault not mine. She said she didnt have my last six months paystubs, which she did. And because she didnt have my June bank statement, which her assistant misplaced. My lawyer told me not to worry about getting confirmation, and to keep making my monthly payments. My 341 is this October 17th. My raise is more than 10%, but like Granny said, it should only show about 100 more a month for 2007. I am hoping to be confirmed before the end of the year and before the trustee sees my 07 tax return or asks for any other paystubs. I hope that i have one of those trustees that doesnt care that i get a raise!!

[Flamingo]

I just filed chapter 13 this august. And my payment is low. I have only made two payments so far and have 58 left! But i am getting an increase in pay this November. After taxes i will be bringing home an additional 600 a month. My lawyer has already maxed out the standard for living expenses, and says that he can not account for such a large pay increase. His advise was to wait as long as i possibly could to file my taxes. I am curious if anyone else has had a pay increase while under chapter 13. And how long did it take for the trustee to find out? Did they take all of your raise? Any info is greatly appreciated!

The main issue here is what to do about an increase of $600 a month 3 months after filing a 5 year Chapter 13 Plan. That leaves well over 4 1/2 years remaining on your Plan during which you will receive this and possibly more additional income. What you need to do here is follow your attorney's advice as to what to do regarding this large raise so soon into your Plan. You are required to report all increases in income, inheritances, lottery winnings, etc., etc. to your attorney and trustee upon receipt during the time you are in your Plan. If you don't report them and your Trustee sees your income tax return (which you are required to send him every year within a certain amount of time after filing), all sorts of red flags can be raise as to why he was not informed sooner of the large increase. You don't want to run the risk of having your Plan dismissed over this if you delay informing your Trustee. Talk to your attorney about this since he/she is representing you and should ensure there will be no problem with you delaying informing the Trustee of this increase. I had a large bonus and pay raise during our 13 and immediately informed our attorney who advised the Trustee. We were able to keep most of it because I explained to the attorney that we needed house repairs, hot water heater replaced, computer for our daughter for schoolwork at home cause ours was on its last legs (it was!). Small pay raises or bonuses usually are not an issue; it is large ones such as yours which will substantially increase your income and in so short a period after your filing. Remember, if this raise occurred prior to your filing, your Plan would have been based on that income. If you try to hide it until the spring of 2009 by trying to delay the income unti after 1/1, you may run the risk of Plan dismissal. I am just trying to be honest here so you protect yourself against the risks that can, and may occur. Chapter 13 is not an easy ride and you don't want to jeopardize your Plan. Best of luck to you!

[aa06a47]

One thing, and not sure if it actually will help, but put that raise in your employeers 401k plan. Your gross income will stay the same as far as taxes go. Of course, I believe the trustee might be able to see it if he digs hard. Ask your attorney if this is an option.

[aa06a47]

By the way, worst case, and it sucks, but your payment will go up about 400/month. (remember, the 600/month raise also raises taxes, so you can deduct that expense). It was money you wasn't planning on having before the raise, so you can probably live without it for the time.