Getting a raise or finding a better-paying job can feel like a positive step forward. If you are in an active Chapter 13 bankruptcy, however, you may wonder whether earning more will change your monthly payment or affect your case. An increase in income does not automatically mean your Chapter 13 payment will go up. However, a significant change in your financial circumstances can sometimes lead to a request to modify your repayment plan.
A raise does not automatically change your payment
Your confirmed Chapter 13 plan does not automatically change just because your income increases. However, federal bankruptcy law allows a plan to be modified after confirmation in certain circumstances.
The terms of your plan, your income, your expenses and other financial circumstances can affect whether a modification is appropriate. The requirements may also depend on the terms of your case and applicable bankruptcy procedures.
Your plan may be modified
Under federal bankruptcy law, a Chapter 13 plan may be modified after confirmation to increase or decrease the amount of payments in some circumstances. A modification can also change the length of time for making payments, subject to the requirements of the Bankruptcy Code.
This means a substantial increase in income could lead to a request to increase your plan payments. It does not mean that every raise will result in higher payments. Depending on the circumstances, the trustee, you or an unsecured creditor may seek a modification. The court must approve a proposed modification.
What should you do after getting a raise?
If your income increases during Chapter 13, do not assume that you need to change your payment or that your case is in trouble. Instead, review the change with your bankruptcy attorney.
Your attorney can look at your new income alongside your household expenses and the terms of your confirmed plan. This can help determine whether you need to take any action or whether your existing plan can continue as approved.
An income increase can be a welcome change, even while you are completing a Chapter 13 case. Understanding how the change may affect your plan can help you move forward without unnecessary worry.
For Oregon cases, the U.S. Bankruptcy Court for the District of Oregon administers bankruptcy cases under federal law and its Local Bankruptcy Rules. The requirements that apply to your case can depend on your confirmed plan and the circumstances of your bankruptcy.
