Income Changes During Bankruptcy: Do They Affect Your Case?
If you get a raise or a pay cut in the middle of a bankruptcy, will it affect your case? As a Memphis bankruptcy lawyer, I’ve seen all the possibilities. Here’s what you need to know about income changes during bankruptcy and what the rules might mean for you.
How a Raise or Job Loss Impacts Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, you can discharge your unsecured debts. Those often include:
- credit card debt
- medical bills, and
- unsecured personal loans
In order to make sure you need this kind of bankruptcy, you qualify with something called a “means test.”
A means test just refers to whether your income falls into a certain threshold. This can vary from person to person depending on things like the size of your family and major expenses.
During your free initial bankruptcy appointment, when you first come in to speak with our attorneys, we can help you figure out whether you qualify for Chapter 7 and if it’s the right choice for you and your goals.
Once you’ve qualified and filed Chapter 7, your income doesn’t really matter to your case anymore. Whether you lose your job or get a raise moving forward, your debt will be forgiven according to what the court decided.
That means a total fresh start: free of creditors, wage garnishment, and other worries. (We outline exactly what this could look like for you in our free report Life After Bankruptcy.) So if you do get a raise, you can keep it and use it on yourself instead of your debt.
Chapter 13 Bankruptcy and Your Income
Chapter 13 bankruptcy works a little differently. With Chapter 13, you and your attorney work with the courts to design a payment plan based on your unique situation. Your income plays more of a role in this plan, as they’ll use it to determine what you can afford.
A trustee helps oversee your case. Generally speaking, you’re supposed to let your trustee know if you have any major changes in income. If you experience a loss in employment or a big raise, it can impact how much you’re able to pay.
Sometimes a raise won’t affect your payment plan at all. For example, let’s say you get a better job further from home. You enjoy your new work more, but the cost of your longer commute nearly cancels out most of your raise. In that situation, the courts likely wouldn’t change your payment plan.
In general, you want to be honest and clear with your trustee. If they somehow discover you haven’t been truthful about your income, it could impact your repayment plan or even your case as a whole.
Our Memphis Bankruptcy Lawyers Can Help
A lot of the rules around income and bankruptcy are so specific to your individual circumstance that it’s hard to write one answer for everyone.
That’s why we offer a free consultation to answer any questions and help you figure out your best options.
Our Memphis bankruptcy attorneys have worked with plenty of clients who went through income changes during bankruptcy. We’ve helped hundreds of people in Memphis get out of debt for good—and we can help you, too!
To get started, all you have to do is fill out the form below or give us a call at 901-327-2100 to set up an appointment. We’ll be happy to answer any questions you have and give you and idea of what to expect.
Don’t let worries about income one way or the other stop you from getting the fresh start you need. Contact us today.