An answer to the question of how changes in income impact bankruptcy first requires some background.
In chapter 13, disposable income is the amount of income remaining after the deduction of reasonable expenses. For above median income debtors, the means test deductions provide what expenses are reasonable. A chapter 13 plan must pay the projected amount of disposable income to unsecured creditors.
Frequently Asked Questions
Our frequently asked questions also address Disposable Income:
The requirements for repaying creditors in a chapter 13 are somewhat detailed. The following is a general summary that notes the basic rules without going into finer details or exceptions.
We have discussed Disposable Income in the following posts on our bankruptcy blog:
Millions of Americans support charitable and religious organizations with financial gifts every year. For some time, Congress has articulated a public policy in favor of charitable giving. The best known example is the charitable income tax deduction, which has been around since the War Revenue Act of 1917. This public policy also led to the adoption of the Religious Liberty and Charitable Donation Act of 1998 and a follow-on Religious Liberty and Charitable Donation Clarification Act of 2006.
Many people have credit card debt, and many people file chapter 13 bankruptcy. But what about when there is credit card debt in chapter 13 bankruptcy? Chapter 13 plans are repayment plans, a fact that causes a good bit of uncertainty for people considering bankruptcy as a way to get out from burdensome credit card payments. This post explains the basics of how credit cards are treated in chapter 13, and explains why many chapter 13 plans provide no payment at all to credit card lenders.
For many, bankruptcy first comes to mind as solution utilized by a person recently unemployed. Indeed, many people do file bankruptcy after experiencing a job loss, and there are certainly many cases where bankruptcy debt relief can be very helpful when household income has declined. So why would someone file bankruptcy after income has increased?