Chapter 13 is an option that allows you to consolidate your debt through a repayment plan. Your plan payment will be driven by your income, your assets and your debts. As you might imagine, your income must be regular an sufficient to allow your repayment plan to work. Your goal is to protect the things you own while repaying your creditors through your plan. Your Chapter 13 case will be assigned to a bankruptcy judge and a Chapter 13 trustee will be charged with the administration of your case. As a practical matter, your trustee will be charged with the administration of your case. As a practical matter, your trustee serves as a gatekeeper during your case and will recommend to your judge whether your plan should be confirmed (approved) or your case dismissed. One of the trustee’s duties is to determine whether the income shown on your bankruptcy schedules can be documented. This is simple enough when your income is in the form of:
- Pay advices from your employer
- Pension, retirement or annuity statements
- Income from the Social Security Administration, the Department of Labor (unemployment), or some other entity, such as a workers comp check
If your income or part-time income cannot be documented, it is unlikely that your trustee will recommend your case for approval. For example, if your bankruptcy schedules show you receive $600.00 per month as part-time income, if that income has been cash or under the table income, you must find a way to document that you regularly receive income in that amount. So, however in the past you may have maintained payment records (or did not maintain payment records). When you file a Chapter 13 case, you enter into a brand new world of close scrutiny by your trustee and your judge. It has been said more than once that all trustees must come from Missouri because it is the “Show Me” state. In order to have your case approved, you likely will have to change from a cash basis to a check or money order payment basis and produce proof of any payments you receive.
Other ways to document income may include
- Bank statements
- Your own regularly kept, hand-written or computer-generated personal record of income received
- Letter or affidavit from the person or business entity paying you with sets out the payment arrangement
Keep in mind that any business entity paying you will, more than likely, prefer a record of any payments to you for purposes of establishing a business tax deduction. Also if your household income includes any contribution from a family member or roommate, for example, the trustee will require an affidavit for the duration of your plan. Please contact one of our attorneys if you have any questions.