How to Handle Changes in My Budget While I am in my Chapter 13
When Chapter 13 was first made part of the law, it was called the “wage earner plan” because it was designed to help working people with regular income stop financial crises like foreclosure and repossession. Although the law has evolved to permit anyone with a “regular income” to file Chapter 13, there is still an assumption that you will have a steady source of income during the three to five year life of your Chapter 13 plan.
Given the frequency that most people change jobs - whether voluntarily or involuntarily, you would be the exception if you stayed at the same job, with no break in income or changes to your expenses, for five years. What, then, happens if you experience a change in your income and/or expenses during the course of your Chapter 13 plan?
Loss of Income or Increase in Expenses During Your Chapter 13
Although positive financial events could happen to you during the course of your Chapter 13, statistically you are more likely to face the problem of not having enough money to fulfill your plan obligations. Examples of money problems you might face include:
- a job layoff
- loss of hours causing reduced pay
- an unexpected illness faced by you or a loved one
- unexpected non-medical emergency expenses
- increased insurance costs
- a family pregnancy or baby’s birth
If you lose the ability to pay into your Chapter case and/or to pay your on-going direct payments (mortgage, tax, student loans, etc.), your trustee may file a Motion to Dismiss your case.
Your first reaction to a negative change in your budget should be to call our office at 404-522-2222. Please call us sooner rather than later to maximize your options. Some of your options include:
- requesting an informal two to three month payment deferment from your trustee
- filing a Motion to ask your Judge to issue an Order requiring the trustee to issue a deferment
- negotiate with your mortgage company to repay missed payments over an extended period of time
- negotiate with your trustee to repay missed payments over an extended period of time
- convert your Chapter 13 case to Chapter 7
Increase in Household Income or Decrease in Expenses
If you experience positive financial news, we are expected to report that to the Court, just as we would bad news. If you suddenly have more disposable income, your trustee may want us to increase your Chapter 13 plan payment.
Generally, it is not a good idea to send extra money in to your Chapter 13 trustee without first speaking with our office. There are a number of local rules and procedures for paying off a case early and you should not attempt to do this on your own.
In Chapter 13, pretty much everything is negotiable and we have learned through years of experience not to assume that good news will always continue. Again, if you end up with a windfall, call us to discuss the best strategy and legal requirements for dealing with additional money.