Amid bankruptcy, you may associate a pay raise with a step in the right direction toward financial stability. However, this income increase may have implications in your Chapter 13 bankruptcy proceedings. Read on to discover why you should report your pay raise and how a seasoned Louisville, Kentucky Chapter 13 bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you in doing so.
Why do I have to report my pay raise in my Chapter 13 bankruptcy?
Almost immediately upon receiving the news that you are to receive a pay raise, you should report it to your Chapter 13 bankruptcy trustee. This is because the trustee must then determine whether this additional income should be incorporated into your three- to five-year repayment plan to your creditors. But usually, if you have maintained a steady track in your repayment plan, this additional income may not be used.
It is important to mention that, besides a pay raise, you should notify your trustee of any extra funds you have been bestowed. Examples include receiving your annual tax return; receiving paychecks from a side gig or freelance opportunity; receiving an inheritance from a loved one (if you inherit it within 180 days of your filing date); and more.
Overall, it is not worth hiding your pay raise from your trustee. This is because if they happen to find out on their own, then your Chapter 13 bankruptcy petition may be dismissed altogether. What’s worse, you may be charged with bankruptcy fraud, which could mean a prison sentence of up to five years and a fine of up to $250,000.
Do I have to report this in a Chapter 7 bankruptcy?
At the same time, it is strongly recommended to report your pay raise during your Chapter 7 bankruptcy proceedings. In the instance that you experienced an income change soon after you filed your petition, then you may simply inform your bankruptcy trustee during your creditor’s meeting. From here, your trustee may or may not request that you file updated forms; this is dependent on how much your income has changed.
The reasoning behind this is that there is technically an income limit for Chapter 7 bankruptcy. So, if you exceed this limit, then you may be directed toward a Chapter 13 bankruptcy petition instead. Without further ado, such income limits in the state of Kentucky are as follows:
- For a household of one: an annual income limit of $51,824.
- For a household of two: an annual income limit of $61,945.
- For a household of three: an annual income limit of $70,091.
- For a household of four: an annual income limit of $87,902.
- For a household of five or more: an extra $10,000 per additional household member is added to the annual income limit.
In the end, you must disclose your pay raise as soon as possible. So call a competent Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center today.