Understanding Bankruptcy: Does a Chapter 13 Trustee Monitor Income?
In 2023, the average household debt in America was $101,915. Year after year, these numbers continue to grow.
Living with debt is the new norm, but you don’t have to lose hope of becoming debt-free. Filing for Chapter 13 bankruptcy can help individuals get back on track financially.
What exactly is Chapter 13 bankruptcy? Does a Chapter 13 trustee monitor income? Keep reading to learn the answers to your questions.
What Is Chapter 13 Bankruptcy?
To answer the question, “Does a Chapter 13 trustee monitor income?”, you need to understand this form of bankruptcy. Chapter 13, sometimes called a wage earners plan, helps regular-income individuals pay back their debt.
Chapter 13 bankruptcy reorganizes your debt and lowers interest payments to help you get back on your feet. With a suitable payment plan, you can start to gradually decrease your debt.
The individual will pay a trustee every month so that they can distribute payments to the corresponding creditors. The Chapter 13 debtor won’t have contact with creditors.
Those in debt can’t add additional collections but don’t have to surrender valuables. If a home has entered foreclosure because of debt, Chapter 13 bankruptcy allows you to keep the home.
An attorney will help you protect your assets, including your home and vehicle. If you are responsible for making alimony or child support payments, lawyers can protect you from outstanding delinquencies.
Anyone employed can file this form of bankruptcy if their debt is less than $2.75 million combined.
Does a Chapter 13 Trustee Monitor Income?
During Chapter 13 bankruptcy, a trustee is assigned to you. They are responsible for collecting and submitting your monthly payments in correspondence with your repayment plan.
A trustee won’t monitor your income, but you should report changes to your finances. No matter how small, a change in income can impact your payment plan.
Information withheld can result in fraud or hefty fees. Your punishment for not disclosing important information to your trustee could be up to $250,000 or up to five years in federal prison. These are the maximum federal charges.
Your bankruptcy case could be dismissed if you hide wage increases. You’ll be forced to face your outstanding debt without the help of a repayment plan, putting you back where you started.
So, while a trustee won’t personally monitor your income, you must share financial information with them. A Chapter 13 trustee will be responsible for:
- Determining if you qualify for Chapter 13
- Presiding over creditor meetings
- Making sure your filing forms are correct
- Approving your repayment plan
The trustee will confirm your repayment plan by using the information they find in your financial documents.
Bank Account and Credit Report Monitoring
A court-appointed trustee can request to turn over your bank statements. Commonly, the request is authorized by a bankruptcy judge.
A trustee is responsible for reviewing your assets and creating a repayment plan that fits your needs. Because of this, they need access to your financial statements, including your bank account.
Any extra money in your bank account at the end of the month is yours to keep as long as you are following the rules for your Chapter 13 bankruptcy. You cannot hide your money or assets.
As long as you are making your scheduled payments on time, you can spend your extra money where you see fit.
The trustee will not monitor your credit report. As the debtor, you should keep an eye on this report to catch any potential errors.
Once your bankruptcy is accepted, it is recorded on your credit report. This means that creditors are legally barred from making reports to major credit unions until the repayment process is complete.
Income and Wage Increases
Chapter 13 bankruptcy is a long process that can take years. During this time, your income may increase and affect the terms of your repayment plan.
These changes could lead to higher scheduled payments:
- Work bonus
- Significant pay raise
- Extra money from a side hustle
If you are married, your spouse’s raise, bonus, or additional earnings could affect your payment plan as well.
While it’s common that these increases lead to higher payments, this is not always the case. Whether you are required to pay more will depend on the size of the pay increase or bonus.
An experienced Chapter 13 bankruptcy lawyer can help you avoid an increase in your monthly payments. They will argue on your behalf that an increase in income is offset by:
- New family member addition
- Necessary medical treatment
- Home or vehicle repairs and maintenance
- High inflation
- New household expenses
There are different ways an attorney can provide evidence to the court on your behalf.
How to File Chapter 13 Bankruptcy
You must have a form of regular income to work through the debt repayment process. The court won’t accept your Chapter 13 bankruptcy filing without enough income to create a feasible repayment plan.
Gather important information and fill out all of the necessary forms to file. It’s always recommended to hire a Chapter 13 bankruptcy lawyer to walk you through the process.
When you have legal representation on your side, your attorney will directly deal with the trustee and report changes in income on your behalf.
Before filing your paperwork with the court, you must take a credit counseling course by law.
A trustee will verify your paperwork and other information, such as:
- Bank statements
- Paychecks
- Tax returns
A trustee will meet with you within two weeks after you file with the court. You’ll need to pay various fees for a trustee to help you get your bankruptcy approved.
Upon approval, you’ll be required to take debt education courses. You’ll receive your repayment plan and begin paying back your debts.
Hire a Debt Relief Lawyer Today
Does a Chapter 13 trustee monitor income? While trustees won’t directly monitor your income, they handle your monthly payments so you must report income changes to them.
When you hire a debt relief lawyer, they will handle everything on your behalf. At Meredith Law Firm, LLC, we work with individuals seeking out Chapter 13 bankruptcy and other forms of debt relief.
Since 1996, we’ve helped people like you make difficult situations better. By reviewing your finances, we can come up with a plan that will get you out of debt faster.
Schedule a free consultation to go over your options.