Its a huge relief to file forChapter 13 bankruptcy. After successfully filing you will finally have protection from foreclosure, assistance with credit card debt and you won`t have to worry about your wages being garnished any longer. Once the judge approves the repayment plan you have proposed your creditors must accept it whether they like it or not.
Don`t be fooled though. You aren`t completely out of hot water just because you aren`t constantly getting calls from bill collectors anymore. You have to remember a few rules throughout your repayment plan.
If you have a change in income during your Chapter 13, you have to report it 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 hours at work, lose your job, or have any other unforeseen decrease in income, your payment plan can be modified and possibly lowered. If your income becomes too low, you may want to look into declaring for a Chapter 7 bankruptcy instead.
This does work both ways, however, if your income does increase you must report it. Generally this is referred to as the best efforts test. What this means is that you must use your best efforts to repay creditors should you get a raise. It should be noted that your income is not the only thing that determines how much you have to pay on your Chapter 13 payment plan. With all these factors to consider it`s important to have an experienced, qualified bankruptcy attorney.
Keep in mind, if you do not report an income change, the consequences are not pretty. One of the immediate consequences is that you may not be granted your discharge. Imagine clearing your eligibility requirements, the hours of court hearings, and the formation of your repayment plan all being wasted. It would be incredibly frustrating to not receive the benefits of bankruptcy that you fought so hard for, a risk that isn`t worth taking.
Losing your discharge may not even be the worst part of failing to report income increases. If your Trustee rules that you`ve withheld your income information deliberately, you could be charged with bankruptcy fraud. The punishment for bankruptcy fraud is $250,000 in fines and up to five years in federal prison.