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Filing for Chapter 13 Bankruptcy with a Variable Income

Posted on in Chapter 13 Bankruptcy

Filing for Chapter 13 Bankruptcy with a Variable Income

Chapter 13 bankruptcy is an option for individuals who have an income to work through their debt issues and move toward a financially sustainable future. Unlike Chapter 7 bankruptcy, which involves ceding control of the filing party's assets to a court-appointed trustee to liquidate and use the profits to pay off his or her debt, Chapter 13 pairs the filer with a trustee to develop a repayment plan that will allow him or her to repay the bulk of his or her debt over a period of three to five years. This type of bankruptcy puts more responsibility on the bankrupt party, but also allows him or her to retain his or her assets.

When determining any bankruptcy plan, the filing party's assets and income level must be determined. The court needs to determine that you can repay your debt obligations with your income before it approves of your Chapter 13 plan. If you make an irregular income, proving this can be difficult. However, it is not impossible. If you are a real estate agent, a freelance writer, a server in a restaurant, a salesperson working on commission, or in any other position that does not provide a consistent salary each month, speak with an experienced bankruptcy lawyer about how you can handle the Chapter 13 process.

What is Your Average Monthly Income?

To determine this, take your total earnings for the last year and divide that number by 12. This is your average monthly income.

How much your income varies from month to month can have an impact on whether your Chapter 13 plan is approved. If you have significant swings in your income, such as earning $8,000 one month followed by a month of earning nothing, followed in turn by earning $1,500 the next month, your plan is much more likely to be rejected than it would be if you made $4,000 one month, followed by $6,000, followed by $4,900.

Work with your lawyer to determine a static payment amount to make toward your repayment plan each month. Do this by determining your average monthly income and expenses. Strict budgeting is critical to making this type of plan work. If you cannot get a Chapter 13 bankruptcy plan approved, you might be a candidate for Chapter 7 bankruptcy. Talk to your lawyer about this possibility and what filing for Chapter 7 bankruptcy would mean for you and your financial future.

Work with an Experienced Carpentersville Bankruptcy Lawyer

If you have a variable income, it can be very difficult to develop an acceptable Chapter 13 bankruptcy plan. To get a better handle on how you can do this with your income, speak with an experienced bankruptcy lawyer. Contact our team at Newland & Newland, LLP today to schedule your free legal consultation in our office. We serve clients in the North Chicago, Fox Lake, Zion, Winthrop Harbor, Waukegan areas from out our office located in the prestigious 180 North LaSalle street building in Chicago.

(photo courtesy of Darren Hester)

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