If you have a job change during your Chapter 13 plan in NY, you will need to know what impact this will have on your bankruptcy case. After all, Chapter 13 plans last between three and five years, so the likelihood of a job change during that timeline is quite high.
At Grady BK, PLLC, we approach all of our clients with the goal of providing one-on-one legal attention and guidance during the bankruptcy process. We understand how overwhelming and stressful bankruptcy can feel, so why we strive to provide clarity and peace of mind. In this article, we will discuss the impact of a new job on Chapter 13 bankruptcy and the steps you need to take to protect your repayment plan.
What You Must Report to the Bankruptcy Trustee
When you take the leap and file for Chapter 13 bankruptcy in New York, a trustee will be assigned to your bankruptcy case. The trustee oversees all the aspects of your bankruptcy case from start to finish. Because of this, if anything changes, you will want to update your case.
KEEP IN MIND – YOU NEVER WANT TO CONTACT THE TRUSTEE DIRECTLY. Always call your attorney and have your attorney give any information to the trustee so that it is presented in the best way possible and does not hurt your case.
Most types of employment changes can impact your Chapter 13 repayment plan, so you must report these changes as quickly as possible. The changes you need to report include:
- New job
- New stream of income
- Loss of employment
- Reduction in pay
- Bonuses
- Raises
- Health issues that impact your earning abilities
- Loss of medical insurance
You never want to hide any financial changes from the trustee, as this can result in serious issues with your bankruptcy plan. Also, you should try to notify the bankruptcy trustee as soon as possible, either before or directly after one of these changes has occurred.
When you notify the trustee, make sure you prepare beforehand and can provide them with documentation reflecting the changes in financial circumstances. The documentation you should provide includes things like paystubs, termination notices, job offer letters, doctor’s notes, etc.
How a Job Change Affects Your Repayment Plan
Now that you know about updating the bankruptcy trustee about job changes, how does this situation affect your overall bankruptcy plan? How a job change impacts your Chapter 13 repayment plan depends on whether or not you now earn more or less.
If your new job pays less, you probably can no longer comfortably maintain your Chapter 13 repayment plan. This is because repayment plans are carefully formulated to reflect your financial situation at the time that you filed. So, if your income goes down with a new job, you need to request a plan modification to reflect this.
You also need to request a modification if you lose any job-related benefits, as these can result in additional expenses not included in your original repayment plan.
For job changes where your income increases, you still need to report this to the trustee. When this happens, your monthly payments may go up since you have more disposable income.
If you don’t already have a bankruptcy attorney, you need to seek out legal representation if your financial situation changes in any way. An attorney will have experience navigating changes to Chapter 13 repayment plans and can help you decide what to do next. They can also help you avoid running into serious complications with your repayment plan, such as non-compliance if you aren’t able to keep up on your monthly payments.
What Happens If Your New Job Pays Significantly Less?
Sometimes a job change can drastically reduce your monthly income for reasons outside of your control. In these types of situations, you may need to request more than a simple plan modification.
For significant job changes where your income goes down, you may have the option of requesting that your Chapter 13 bankruptcy plan be switched to a Chapter 7 plan. Converting to Chapter 7 bankruptcy is only a possibility if your income now meets the eligibility requirements for Chapter 7. If you now qualify for Chapter 7 bankruptcy, you can have your dischargeable debts discharged, without the need for a repayment plan.
If your income goes down dramatically, it is crucial that you act quickly and notify the bankruptcy trustee. Failing to do so goes against your repayment plan and also puts you at risk of not having the funds to keep up with your monthly payments.
By notifying the trustee as soon as possible, they can help you modify your plan so that your monthly payments reflect your new financial circumstances.
FAQ
Do I have to tell the court if I get a new job during Chapter 13?
Yes, you must report any income changes, whether your income increases or decreases. This includes if you get an additional job, get a raise, or lose any of your benefits. Failing to report financial changes puts you at risk of non-compliance and potentially losing your repayment plan.
Will my payments increase if I get a raise?
Sometimes. The bankruptcy trustee will examine your finances, the raise, and the progress you have made on your repayment plan. They will ultimately determine whether the change is significant enough to require that your plan be amended.
New York’s Top Compassionate Bankruptcy Attorney
Going through a job change during Chapter 13 bankruptcy in NY can come with some challenges, so it’s always best to consult with a bankruptcy attorney in New York. At Grady BK, PLLC, we can help you handle all aspects of your bankruptcy case with confidence and peace of mind. This includes navigating any changes that you need to make to your Chapter 13 repayment plan before you complete it.
At Grady BK, PLLC, we treat each of our clients as though they were our only client by providing personalized legal guidance. You can reach out to us if you have any questions or need help getting the process started.
Contact us today at 315-299-9005 to discuss your situation with a bankruptcy attorney in New York. Our team at Grady BK, PLLC, is here to help, whether you have already started the bankruptcy process or are still deciding on the right type of bankruptcy.
