Last year I had some financial difficulties and I couldn't pay off my debt. The uncertainty of my financial future was adding to my already stressful life. After months of worry, I finally decided to contact a bankruptcy attorney. After discussing my options with the attorney, I decided to file bankruptcy. My name is Kyle Diggler and if you're struggling with debt and considering bankruptcy, I'm here to help you. I'm not an expert, but I want to share my story and my experience of filing bankruptcy with others who are in a similar situation. As you read my blog, you'll learn all about the bankruptcy process so that you'll know what to expect. I'll also share some tips to help you start your life over financially. I hope that my blog answers all the questions you have about filing bankruptcy.
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There are several advantages to Chapter 13 bankruptcy, including the ability to save secured assets and the eventual discharge of remaining debt. But it's also a three- or five-year commitment. And since no one can foretell the future, your financial situation may change before it's done.
What happens if it does? What do you need to do? And what options does it open up? Here's what you need to know about responding to midstream income changes.
If Your Income Rises
Have you had the good fortune of landing a better job or seeing your side hustle take off? Don't ignore its effects on your bankruptcy case. Because Chapter 13 repayment plans are based on income, you are expected to report any significant increases.
What happens after you report this increase? In general, your repayment plan will likely be reevaluated. As with the initial plan, you are closely involved in this process, so you can propose a new arrangement more in line with your new circumstances. The trustee will have to agree to the update.
You may be forced to convert a three-year repayment plan to a five-year one. Why? In general, the purpose of longer repayment plans is for higher earners to pay back more to their debtors.
If Your Income Falls
Unfortunately, you may lose your job, get laid off, or suffer a business setback instead. What happens if you start earning less? The bankruptcy court will allow you to request a modification of your repayment plan if you can no longer afford the current amount.
This modification may be temporary, such as for a debtor who faces a temporary layoff or an unexpected one-time financial issue. But it can also be permanent for the remainder of the period.
Another option is to switch from your current timeline — either three or five years — to the other. Lengthening your repayment reduces monthly payments, but shortening it means less money overall paid to creditors.
Finally, you can also convert your Chapter 13 bankruptcy to Chapter 7. While this means giving up a secured asset or losing some other assets, it isn't dependent on your income going forward. The bankruptcy would be over and you can start moving forward financially.
Where Can You Learn More?
Want to learn more about Chapter 13 bankruptcy? Facing a change in income during an open case? Considering a change to Chapter 7? Start by meeting with a bankruptcy attorney in your state today.
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