how does the trustee find things?

[tbone123]

If you are current on your monthly payment, how does the trustee find out if you got a bonus at work or took out a 401K loan. Do they periodically ask for pay stubs? If your income tax always had the bonus, and your yearly income doesn't really change, how do they know?

[justbroke]

If your attorney already factored your bonus into your income, then there is nothing to see. If it was not factored, the Trustee either has already had your payment (DMI) adjusted at your confirmation or the Trustee may see a difference in pay the next year. Typically, Trustees are not concerned with increases less than 10% (don't ask me to point to any part of the bankruptcy code, but 10% has been consistent). So, you might get by without them ever "noticing" the bonus over the years that you are in the plan, unless it's a significant bonus (don't ask me what is significant, but remember the 10% rule).

As for 401(k) loans, they can't tell about those unless they were to examine your paystubs. In many cases, some jurisdictions don't consider the post-petition 401(k) loan to be any sort of new debt. The problem with post-petition Chapter 13 401(k) loans, is really about the debtor's ability to keep up payments while having a new mandatory payroll deduction.

As most (Chapter 13) Trustees would say, just keep up your payments, and pay everything on time and you will never hear from the Trustee (other than the annual statement and at plan completion).

[tbone123]

Thanks for the info. I am still researching my options (whether to file or not to file), and wondering just how involved the Trustee would be for a long five years. I can understand checking tax returns every year, but can't imagine him checking pay stubs periodically. I don't anticipate my income fluctuating very much, but I worry about emergencies and no emergency fund. I'm really curious if anyone that has been in a chapter 13 for a while has had any other contact with the Trustee other than the yearly check-in?

[justbroke]

The trustee is not involved much. Unless you live in the Districts that require you to submit your annual income tax return, you will have almost zero interaction with the Trustee. Even in Districts where you must file a return with the Trustee, the Trustee does not do anything unless there is a significant change in income (remember the 10% rule?).

Trust me... you just pay and you never hear anything! The only time I had anything from the Trustee was the annual statement of my Plan. (Well, the third time was when my payment increased due to an escrow change.)

The plain simple fact remains that a successful Chapter 13 debtor both stays on budget (plan) and saves. If you refuse to, can not, or are unable to do either, then you are doomed from the start.

[TheBajan]

Hello and welcome!

We hear from our trustee twice a year. Every six months we receive a report of distribution. We are responsible for sending a copy of our tax return to him and that's pretty much all he is concerned with. We've also heard that if our income goes up we might have our payment increased. However, our income did go up and he hasn't increased our payments. When we send our return in for 2013, it will show a decrease in our income as my husband is currently deployed. After that we just have one more tax year to go and we will be finished.

The main thing is to keep your head down, make your payments on time, DO NOT take on new debt, and absolutely build an emergency fund. We all have to learn creative ways to do that but it's vital to the success of a chapter 13. It can and must be done. I promise you that over the next five years, it's going to rain. Be ready for it and you will be fine.

Best regards,
The Bajan

[LadyInTheRed]

I've been in Chap 13 for 3 1/2 years. The only time I have heard from my trustee is when she sends the annual report. I don't have to send her copies of my tax returns. I have received bonuses and raises. Each time, I call my attorney to make sure the extra income doesn't have to be reported to the trustee. My attorney always says "congratulations. Keep making your plan payments." The payments on my adjustable rate mortgage that I pay directly have decreased twice and the mortgage company files a notice with the court with a copy to the trustee. The trustee has not tried to increase my payment.

This question comes up quite often and the vast majority of Chap 13 filers respond with stories like are being posted here.

[dmc-2008]

I just made my 14th payment (woo hoo almost 1/4 the way) and haven't heard a peep! Knock wood!

[andy158]

In the course of our bk we have taken out two loans against my 401(k). One for a new transmission for the car included in our plan (emergency fund was not enough to cover that expense). It has been paid off. The second was for a new a/c unit for the house. Still paying on that one. Asked our attorney before taking out loans and his reply was "if it is a necessary expense and as long as you can still make your plan payments, it doesn't need trustee approval". My loan payment on the second is only $38 every two weeks.

We also have to submit our tax returns to our trustee and haven't heard anything other than their usual statements. I have received profit sharing bonuses that were factored in when doing our schedules (biggest was $4k before taxes) and consistent raises over the years. Wife took a job promotion and her salary increased 25% over the last two years, but our overall income has not changed drastically. I just work less overtime. Again nothing said.