Is it possible to decrease Chapter 13 time frame?

[serenity2022]

If a significant increase in income occurs, is it possible to modify a Chapter 13 plan to a shorter time frame? Or will the payments to the trustee/creditors just be increased and commence with 5 year plan?

[justbroke]

It's always possible. If you are not in a 100% plan, however, it will likely mean that you will need to pay 100% of the allowed unsecured creditor claims. Of course, I'm talking about those that are required to be in a plan no less than 60 months (or to pay 100% of the allowed unsecured claims).

The calculation of whether or not a debtor will be in a 100% plan, after a significant increase in income, is too fact-specific. It depends on factors such as the following; how long in the plan has the debtor been? is the amount, from that point forward, sufficient to pay 100% to the creditors early? along with many other competing factors.

For most debtors, decreasing the length of a Chapter 13 is simply not achievable.

[shipo]

serenity2022, I have a question which may help us answer your question:

• What percentage of your outstanding debt will have been paid if you stay in your current plan with no changes?

[serenity2022]

shipo I will have paid 35% at the end 35% with no changes.

[serenity2022]

justbroke Thank you very much. The plan is only 35% and halfway through the plan. The income increase hasn’t happened yet. But if it does, it sounds like I will need to ride out the remaking years and look forward to a little extra income when it’s complete.

[shipo]

So here's the deal, if your income rises enough, the Trustee will take note when he/she looks at your income taxes and most likely, bump what you pay per month and also bump how much money your creditors will get. I believe the figure I've seen around here is an increase in income of at least 10% is the threshold before most (all?) trustees take action and ask for more money (kind of makes me glad the promotion I got in my 4th year only netted me 9% more income).

To justbroke's comments above, the only way you can shorten the time of your Chapter 13 is if your increase is so high you can pay off ALL of the debt you owe before the term is up.

[muneco]

We were required to submit annual tax returns to the trustee and submit schedules I and J to the court. Schedules I and J list income and expenses. For all annual increases in income we were able to offset them by increasing our expenses, usually in the home maintenance and food categories.

[shipo]

We were required to submit annual tax returns to the trustee and submit schedules I and J to the court. Schedules I and J list income and expenses. For all annual increases in income we were able to offset them by increasing our expenses, usually in the home maintenance and food categories.

Interesting, I was never asked to resubmit those schedules; is that something which is considered typical?

[muneco]

shipo I am not sure if it is typical to have to submit those items. I believe it pretty rare for a trustee to require it. Our trustee would send a letter 45 days before the anniversary of the case filing date and stated if the documents were not received by the court on time our case would be subject to dismissal. She was a tough trustee. One year we submitted our annual tax return to our attorney to submit to the trustee. The attorney's staff dropped the ball and missed the deadline to submit the return. One week after the deadline was missed we received a letter of intent to dismiss our case. Fortunately, the attorney was able to submit the return and the trustee withdrew the dismissal.

[justbroke]

muneco were you a sole proprietor of a business? Otherwise I don't see why the Trustee would want an I/J each year. Or, was there some other special considerations, such as irregular pay (commission-based income)?

[muneco]

justbroke No, we did not have a business. In fact, my wife and I were both retired at the time of filing and our only income was my pension and my wife's social security when our case was filed. Our income was well over the state's median income. I believe all chapter 13 filers in our district are required to submit I/J and federal tax returns annually.

[justbroke]

Very interesting muneco . I say it's interesting because I never would have thought that a Chapter 13 Trustee could ask for a new Schedule I/J every year. In Florida, we do send in the federal tax returns annually, but never had to redo a Schedule I/J unless seeking a motion to modify.

[muneco]

justbroke Yes, I found it odd to require the I/J every year as the tax returns would have shown any rise in income.

[Carmella]

We are not required to submit income tax forms to the trustee. However our attorney wants us to submit to him. I never asked why, but maybe he keeps an eye on the income to be proactive if there's an increase??? Or maybe it's because we are in 100% plan that we don't have to submit to trustee?

[shipo]

We are not required to submit income tax forms to the trustee. However our attorney wants us to submit to him. I never asked why, but maybe he keeps an eye on the income to be proactive if there's an increase??? Or maybe it's because we are in 100% plan that we don't have to submit to trustee?

Could very well be; my payback was rather south of 100% and as such, my Trustee wanted to keep tabs on my income and give my creditors as much as possible. As a result, he was able to grab all but $1,250 of a rather large tax return during my 4th year.