Since bankruptcy laws allow a bankruptcy court to have a certain amount of latitude in interpreting the laws, how a bankruptcy court handles the reporting of an income change increase in a Chapter 13 bankruptcy can deviate from one district bankruptcy court to the next.
Rule of Thumb in Reporting an Income Change Increase in a Chapter 13
Many bankruptcy lawyers will tell you the best rule of thumb for reporting an income change increase in a Chapter 13 bankruptcy is to simply always report them. Bankruptcy laws require you to let the bankruptcy court know when there has been a change in your income. Here are some normal income change increases that may be handled differently by district courts, but should most likely be reported to the bankruptcy court trustee:
Income tax refunds. Some district courts don’t want you to report income tax refunds, some do. Bankruptcy laws give them the right to ask for a report of the income change if it occurs.
Overtime pay. Since overtime is not always a guaranteed income, it is not considered an income increase that will effect a Chapter 13 plan. Many bankruptcy court trustees might not expect you to report this type of temporary income change increase, and there may be others that expect you to report the increase.
Bonuses. Bonuses are another income that fall into the category that may be temporary or a one time occurrence of an income change increase. Some bankruptcy court trustees in a Chapter 13 plan might want to know about the bonus where others might not want to know.
Special work related additions. In some businesses where a salaried employee is asked to take on special related work situations that are an addition to their regular work description, a company may provide additional income for their employee. This type of income change increase can be very sporadic and something you cannot expect to be used to build a Chapter 13 plan. Many bankruptcy trustees might allow you to keep the proceeds of this type of income increase, but the trustee can legally demand you report the income to be determined if the court wants to use it to make distributions to creditors, especially if you are already in less than a 100 % plan.
Bankruptcy Lawyer Should Know About Any Income Change Increase
Many bankruptcy lawyers have Chapter 13 experience in dealing with the bankruptcy district courts close to where they live. They understand and know most of the panel trustees that work with the bankruptcy courts to handle Chapter 13 bankruptcy cases. If you have a bankruptcy attorney, you should always let them know first about any anticipated or actual income change increase. They can best advise you on how a bankruptcy trustee is likely to react to the sudden windfall of any income.
If you are considering filing for Chapter 13 bankruptcy protection, allow us to help you find a local bankruptcy attorney in your area that will know and understand how to handle any of your income change increase.
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