If you are in a chapter 13 bankruptcy or preparing to file one, you may have heard the term “step up” used by your attorney or the trustee of your case. A step up is when your payments are stepping up in amount, for one reason or another. These are typically set dates where the payment will go up, due to some triggering event.
Examples of step ups are when something is paid off during your bankruptcy plan. For example, say when you file your child is 16 and you pay child support of $300. Your bankruptcy payment right now is $200. When your child turns 18 in two years and you no longer have the $300 a month in child support, you will have a step up in your payment from $200 to $500. As another example, if you are paying your vehicle loan of $250 directly to your lender and the loan will end 3 years into a five year plan. Currently you pay $400 a month for your chapter 13 plan payment. When your car loan ends in three years, your payment will go from $400 to $650.
When you file a chapter 13 bankruptcy you are committing your disposable income to your creditors. Therefore, when you have disposable income, say due to child support, car loans, 401k loans, etc. ending, you would need to pay that extra income to your creditors.
You may be thinking, a lot can change years into a bankruptcy when these step up payments may occur. If your income and expenses change, for a reasonable and necessary expense or reason, your attorney can look at a modification to determine if you can restructure or reorganize your budget.
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If you have questions about bankruptcy and would like to do a free consultation to go over your options, visit www.lifebacklaw.com to speak with an attorney. You will be glad you did!
