What is a payment step up in Chapter 13 Bankruptcy Minneapolis, Minnesota?
If your attorney or trustee is advising you to file a chapter 13 bankruptcy, or you are preparing to do so, you may have heard them use the term “step-up”. A step-up is when you are increasing your payments for some reason. This is usually a set date where the payment will increase due to a trigger event.
Step ups can be when you pay off something during your bankruptcy plan. Say, for example, that your child is 16 when you file and you pay $300 in child support. Currently, your bankruptcy payment is $200. Your payment will increase from $200 to $500 when your child turns 18 and you are no longer paying $300 per month in child support. If you pay $250 of your vehicle loan directly to your lender, and the loan ends 3 years into a 5-year plan, this is another example. You pay $400 per month for your chapter 13 plan. Your payment will increase from $400 to $650 when your car loan expires in three years. When you file chapter 13 bankruptcy, you commit your disposable income to creditors. When you have income available, such as child support, car loan, 401k loan, etc., then you will need to pay it to your creditors. You would have to pay your creditors the extra income you receive.
You might think that a lot of things can change after a bankruptcy, when these step-up payments may happen. Your attorney can examine a modification if your income or expenses change for a reasonable expense or reason.
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