What happens if my income goes down or my expenses go up during my Chapter 7?
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Income may decrease or expenses increase during a Chapter 13 Bankruptcy case. In most jurisdictions, such as Massachusetts, unless it is clear at the meeting of creditors that income will rise, debtors usually keep such good fortune to themselves after their Chapter 13 plans have been confirmed and they start making plan payments on auto pilot. Unless local practice dictates otherwise, this is a smart move. However, if the change is a major one to the downside, there is motivation to explore options. The bottom line is that when increased expenses or decreased income have made a plan payment impossible, there are options to change that payment.
Section 1329 of the Bankruptcy Code allows Chapter 13 plan payments to be modified upon request of the debtor to either “increase or reduce the amount of payment on claims of a particular class provided for by the plan.” Case law generally requires that a change be substantial before the court will allow a payment to be lowered.
Lowering a plan payment can make sense when the debtor still has regular income from employment but that income has simply decreased. In the case of a couple, it can make sense sometimes when one person has lost a job, but it is still possible to survive on the income of the other person. However, if the changes make the basic goals of the plan — like paying mortgage arrears, priority taxes or the value of non-exempt property — mathematically unrealistic, then the plan will fail even if your payment can be decreased.
If the amount available to make plan payments has decreased substantially, it makes sense to check in with your attorney about it. Your attorney will be able to let you know the pros and cons – and feasibility – of a reduced plan payment.
Should I pay for someone to help me with credit repair post bankruptcy?
After successfully filing for bankruptcy, it is important for a person to begin rebuilding his or her credit. While it may be tempting to reach out to a credit repair services, often it can be just as beneficial, and less expensive, to rebuild one’s credit on one’s own.
Normally, it works wonders to sign up for a secured and make payments on time. Even with impaired credit after emerging from bankruptcy, a secured credit card is almost always obtainable. The reason for that is that there is very little default risk for the creditor, i.e. they can take the cash security if you fail to pay. For example, if you put down $1000 on a secured card, you can use the card for up to that $1000 limit.
After some months of maintaining on-time payments, your credit improves, especially with the bankruptcy having wiped out past balances and default activity receding further into the past for credit scoring purposes. These improvements in credit often make obtaining a traditional, though low-limit, credit card possible rather quickly. At this point the process is one of rinse and repeat. In other words, if you continue making on-time payments with the traditional credit card, in time, your credit will improve even more, putting you in a position to get car loans, mortgages and other forms of credit on normal market terms.