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How Will Income Change Affect Your Chapter 13?

Author : Jim Brown

Filing for chapter 13 bankruptcy can be a huge relief. When you are successful in filing your chapter 13 you will finally be protected from foreclosure, get assistance with your credit cards, and you won't have to worry about your wages being garnished anymore. When the judge approves your repayment plan your creditors have to accept it whether they like it or not.

Don't be fooled though. Just because you aren't getting calls from bill collectors doesn't mean you're completely out of hot water. Throughout your repayment plan there will be a few rules you will need to remember. Report any change in income you may have during your chapter 13 immediately. This is because your Chapter 13 repayment plan is created on the basis of several factors, and one of those obviously is your ability to repay your debt based on your income.

This rule is not in place just to get more money out of you should your income increase. If you lose your job, hours at work, or have any other unforeseen decrease in your income, your payment plan can be modified or even lowered. Chapter 7 bankruptcy may be an appropriate alternative should your income become too low.

This does, however, work both ways. If your income increases you must report it. This is often referred to as the best efforts test. This means that you have to use your best efforts to repay your creditors if you get a raise. Your income is not, however, the only thing that determines how much you will have to pay on your Chapter 13 repayment plan. It's important to have an experienced, qualified attorney when considering all these factors.

Keep in mind, if you do not report an income change, the consequences are not pretty. An immediate consequence of this is that you might not be granted your discharge. Imagine after all the hours of court hearings, preparing your repayment plan, and clearing you eligibility requirements that you miss out on chapter 13. Not receiving the benefits of bankruptcy that you fought so hard for would be incredibly frustrating, and a risk that isn't worth taking.

The worst part of failing to report an income increase may not even be a discharge. You might be charged with bankruptcy fraud if your trustee rules that you've withheld your income information deliberately. The punishment for bankruptcy fraud is steep, up to $250,000 in fines and up to five years in federal prison.

Author's Resource Box

Missouri Bankruptcy attorney James Brown has been working to relieve the debt of hard-working American families for over 15 years. He has dedicated his career to educating consumers about options for debt relief and has released 5 publications, including, Get Out of Debt: Secrets Your Creditors Dont Want You to Know. You can request a free copy by visiting his website at .

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Tags:   Missouri bankruptcy lawyer, Missouri chapter 13, bankruptcy fraud

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Submitted : 2010-11-21    Word Count : 1    Times Viewed: 100