The bankruptcy process is often misunderstood by consumers. Many people hold misconceptions about how the process works and what outcomes could result that often influence their decision to file or not. When it comes to filing for Chapter 13 bankruptcy there are generally less risks involved, but many people follow a few myths about the process that could be damaging.
Changes To Income
Chapter 13 bankruptcy includes a debtor's plan, which is the repayment plan that is outlined by the court. This plan determines how much a debtor will be required to pay the trustee each month in order to resolve their debts. One of the biggest myths associated with this is the idea that any and all additional income will automatically increase the amount the debtor will be required to repay. Although there may be changes to the repayment amount specified in the debtor's plan if income levels change in a Chapter 13 case, there is no guarantee that an increase in funds will cause the debtor to pay more.
For example, if a debtor was to inherit money after their debtor's plan has been established, the court would consider the amount as additional income. However, whether the inheritance money is sufficient enough to increase payments is up to the discretion of the bankruptcy court. Tax refunds are also a point of contention in a Chapter 13 case, but most debtors are allowed to keep the lesser amount of $600 or two months worth of plan payments in the event of a tax return. On the other hand, funds such as retirement benefits, mutual funds or similar accounts do not typically affect the debtor's plan payments.
Governing Body
Many people have heard that a Chapter 13 bankruptcy includes heavy monitoring by the bankruptcy trustee. While the trustee's job is to oversee the case, their actions are lawful and required as part of the process. Rather than view these actions as an attempt to govern or micromanage the bankruptcy filing, debtor's should look at the trustee as a tool for ensuring their case is completed smoothly.
For example, the trustee is given full access to a debtor's bank and financial information upon starting the case. Although the do monitor payments and associated transactions, rarely does the trustee require or even review monthly bank statements. The trustee's job is to ensure the debtor is making the required payments and help where needed. The trustee can make payments on behalf of the debtor and even deal with creditors to mediate any interactions that are required between the debtor and creditor. Overall, the trustee should be viewed as a resource not an enemy.
Changes To Income
Chapter 13 bankruptcy includes a debtor's plan, which is the repayment plan that is outlined by the court. This plan determines how much a debtor will be required to pay the trustee each month in order to resolve their debts. One of the biggest myths associated with this is the idea that any and all additional income will automatically increase the amount the debtor will be required to repay. Although there may be changes to the repayment amount specified in the debtor's plan if income levels change in a Chapter 13 case, there is no guarantee that an increase in funds will cause the debtor to pay more.
For example, if a debtor was to inherit money after their debtor's plan has been established, the court would consider the amount as additional income. However, whether the inheritance money is sufficient enough to increase payments is up to the discretion of the bankruptcy court. Tax refunds are also a point of contention in a Chapter 13 case, but most debtors are allowed to keep the lesser amount of $600 or two months worth of plan payments in the event of a tax return. On the other hand, funds such as retirement benefits, mutual funds or similar accounts do not typically affect the debtor's plan payments.
Governing Body
Many people have heard that a Chapter 13 bankruptcy includes heavy monitoring by the bankruptcy trustee. While the trustee's job is to oversee the case, their actions are lawful and required as part of the process. Rather than view these actions as an attempt to govern or micromanage the bankruptcy filing, debtor's should look at the trustee as a tool for ensuring their case is completed smoothly.
For example, the trustee is given full access to a debtor's bank and financial information upon starting the case. Although the do monitor payments and associated transactions, rarely does the trustee require or even review monthly bank statements. The trustee's job is to ensure the debtor is making the required payments and help where needed. The trustee can make payments on behalf of the debtor and even deal with creditors to mediate any interactions that are required between the debtor and creditor. Overall, the trustee should be viewed as a resource not an enemy.