Bankruptcy

Income increased do I have to tell the bankruptcy court?

bankruptcy court

The legal forum a user asked, “I lost my job two years ago and struggled to pay my bills for months. I finally decided to file for Chapter 7 bankruptcy. I have recently found a job. I am wondering how this will affect my bankruptcy filing and whether or not I am required to notify my Chapter 7 bankruptcy trustee of the changes in my income?”

Financial experts suggest that unemployment is the second most common reason individuals file for bankruptcy protection. In fact, although most debtors file bankruptcy due to medical debt, an estimated 22% of debtors file due to a job loss.

Now, while it’s great that you have found employment and you are one step closer to financial freedom and a fresh financial start, it is very important that you are truthful at every step in the bankruptcy process.

Truthfulness when filing your bankruptcy schedules

You mentioned that you have recently become employed. With this in mind, it sounds like you were truthful when you filed your bankruptcy case. For example, when you filed your case you were required to report all types of income, including cash payments from part-time jobs, money regularly sent to you from friends and family members, unemployment income, and disability payments.

While this does not sound like this pertains to you, it’s important to note that bankruptcy filers who intentionally mislead or lie to the bankruptcy court about their assets and income might not only have their case dismissed, but if the court is convinced they were intentionally committing bankruptcy fraud this could be a criminal violation resulting in a federal felony charge.

Notifying the bankruptcy court about changes in your income
So back to your case. Although you recently found a new job, it is important for you to report changes in your income to the court. In fact, your lawyer should notify your trustee of your anticipated wages.

Will this cause a problem? It could, but it will depend on the amount of the wage increase. For example, if you are filing a Chapter 7 case and your wages increase above the median income for your state the trustee may conclude that you no longer qualify for Chapter 7 bankruptcy and move to convert your case to a Chapter 13 case. Small adjustments in income, however, may not impact your case.

What if I filed a Chapter 13 case?

If you had filed a Chapter 13 bankruptcy case instead of a Chapter 7 case, you should still notify your bankruptcy attorney and the bankruptcy trustee. Although the type of case you filed will not change, the trustee may determine that you have more discretionary income to repay your creditors and modify your Chapter 13 repayment plan.

Can I get away without telling anyone?

Some debtors may choose not to notify their attorney and the bankruptcy court about the changes in their income. Unfortunately, if the court finds out that you failed to notify them, you could be in trouble. If you’re lucky they would simply choose to dismiss your case.

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