A question about extra earnings in 13

[BNKRPTinNC]

No yellin' please.

I was wondering why a trustee would want more money if you earned more than when you started the plan. The reason being that, in my case anyway, if you have to pay back 100% to secured but 0% to unsecured and your plan has 60 regular monthly payments then what would that do to the plan? Would it shorten the term? Would they use the money to pay unsecured creditors? If that were the case I can't imagine how an extra couple thousand bucks per year would be divvied up among a half dozen or more creditors that are owed a combined $75K+. Perhaps I am wrong but I was thinking along the line that if you are scheduled to pay a fixed amount, so that it will be over and done with after the term, then putting in more funds would muddy the water, yes? Is the trustee able to change things mid-stream? I guess I am looking at it like it's a contract that has to be paid for 5 years and then you're done but that may be an incorrect assumption on my part. I am 6 months into the plan and I was just thinking about down the road.

[lrprn]

I was wondering why a trustee would want more money if you earned more than when you started the plan.

Because if you significantly increase your income permanently or your expenses significantly decrease permanently and you are *not* in a 100% payback plan, then your trustee will petition the court to amend your plan to increase your payment which increases the % your creditors will receive over the life of your plan.

Until you pay back 100% to all creditors who filed claims or pay 60 months of payments (whichever comes first), you and your lawyer or your trustee can amend your plan for changed, long-lasting financial circumstances.

I guess I am looking at it like it's a contract that has to be paid for 5 years.

This is where you're veering off the road. Ch 13 is not like paying back a loan where the terms are set for the life of the 'loan'. In Ch 13 the terms can be changed if financial circumstances change significantly throughout the life of the plan - kind of like an adjustable rate mortgage that might be reset depending on significant changes in income or expenses over time.

Honestly, most trustees are just looking to see if you are making your payments on time and meeting any other requirements they've set (like turning in tax returns every year). Stay beneath the radar and unless you win the lottery, chances are you'll pay your 60 months as agreed and be done.

[Flamingo]

Your Plan is based on your situation on the day you file and the Trustee is in control of your financial house from that day until the day you are discharged. Therefore, if your income increases, your disposable income increases which would give your unsecured 0% creditors some cash they could not receive before. Many folks don't get this and wonder why they might get in trouble by not reporting any additional income but are really quick to contact the attorney if their income decreases. During your Plan, to avoid any avenue that could result in a dismissal, contact your attorney if you experience an increase in income. The majority of the time there will be no problem but you have the increase documented. The trustee can ask to review your tax returns at any time during your Plan if you do not already have to provide them each year. Your increased income will show there and could create a big issue for you and your attorney if you did not report the increase.

[zeezee]

So I'm a Government employee and and I receive raises every year, although not much (usually somewhere between 2%-3%), will I have to report that each year? Also I receive military retirement pay and disability which also increases by about the same percentage.
I'm in VA.

[Abbey]

So I'm a Government employee and and I receive raises every year, although not much (usually somewhere between 2%-3%), will I have to report that each year? Also I receive military retirement pay and disability which also increases by about the same percentage.
I'm in VA.

my trustee wanted federal tax returns and refunds every year plus paycheck stubs at least once a year to review

[zeezee]

Abbey,

Did your plan amount change based on those pay stubs and tax returns?

[lrprn]

My husband and I have had small raises (between 1-3%) each year we've been in Ch 13. The first year we notified our lawyer about the raises. He told us that supplying our tax returns each year to our trustee as requested *is* notice to the trustee about the income increases and nothing else is required.

This is the accepted practice in our local court with our local trustee. Your trustee and local court may be different, so check with your own lawyer.

[vicmost]

I just asked my attorney about increased income over the plan. The trustee can review your plan at anytime. However, they are much too busy to evaluate old cases. As long as you pay your plan on time and submit your tax returns you're relatively safe. He has never had a client taken plans changed solely to increased income

[Flamingo]

I just asked my attorney about increased income over the plan. The trustee can review your plan at anytime. However, they are much too busy to evaluate old cases. As long as you pay your plan on time and submit your tax returns you're relatively safe. He has never had a client taken plans changed solely to increased income

___________

Dangerous two last sentences in your reply...what may apply or happen to/with you may not apply to anyone else. That's like seeing the speed trap set up on the highway in a certain location and advising your friend the next day that the speed trap won't be there cause they never set them up in the same spot twice; and then your friend calls you that he got a ticket cause they were set up there. Chapter 13's are not cookie cutter or involve guessing games and what the OP needs to do is question his attorney beforehand about any rise in income during his plan and what to do. The same would apply to a drop in income. This is something everyone in a Chapter 13 should do at the start of their plan. It is always best to be cautious and play on the safe side during a Chapter 13; we went through one where if something was gonna happen, it happened. We always checked with our attorney and while what we got as a response was sometimes something we did not want to hear (i.e., had to give up half of an inheritance from insurance proceeds from my father-in-law), we at least knew we had reported what we had to and we complied with what we had to do.

To the OP - Getting an answer from your attorney directly protects you; just because John or Mary don't have to report anything doesn't mean that applies to you.