What Happens If The Debtor’s Salary Increases After Filing A Chapter 13 Wage-Earner Plan?

The Bankruptcy Code requires that the debtor contribute his or her projected disposable income toward the plan payments for the duration of the plan. Although the law imposes this requirement only when the trustee or a creditor demands it, in reality the trustee always requires it, at least at the beginning of the plan. Whether changes in salary will change the payment plan depends on a complete consideration of all of the circumstances.

If the debtor’s income changes after the case has been filed but before the court has confirmed the plan, making it binding on the creditors (which can take as much as six months), the trustee will closely scrutinize the debtor’s disposable income to make sure that the payments and the income are consistent and will incorporate any necessary changes into the plan. If the debtor’s income changes during the duration of the repayment plan, changes in income may not necessitate any changes in payments. However, the trustee may ask that payments be adjusted if the debtor’s income increases significantly. The trustee does not closely monitor the debtor’s income, and it may actually be outside the scope of a trustee’s duties to do so.

The trustee will consider not only the salary increase, but also whether there has been a corresponding increase in disposable income, on which the payments are based. Disposable income is the amount of the debtor’s salary that is left after deducting all reasonable living expenses. If the debtor’s salary increases but so do his or her expenses, there may be no increase in disposable income and therefore no change in the payment plan. If there is a significant increase in disposable income, the trustee may ask for an increase in payment amounts.

If your salary has increased after filing a chapter 13 wage-earn plan you should consult an lawyer to see how you can protect your earnings. Call Harold Faletti Law Office at 720-863-4426 or contact us online today.