Changing jobs can be a tricky business if you're in an active Chapter 13 bankruptcy. Chapter 13 is a reorganization in which you have to pay a specific amount to your creditors on a monthly basis for up to five years. If you change jobs and your income drops, you might not be able to afford your payments, which could get your bankruptcy dismissed. If your income rises, you might have to increase your monthly payments as well.
Obligations to the Court
When you confirm a Chapter 13 repayment plan with the court, you agree under penalty of perjury that you will provide ongoing and relevant information about your financial status throughout the course of your bankruptcy. While this often takes the form of simply providing annual tax returns, if you change jobs and your income changes, you must report this to the court right away.
Although you have to report financial changes to the court, you are not restricted from taking another job. The purpose of bankruptcy is to give debtors a fresh start, not to prevent future financial success. While you might have to put more money into your repayment plan, once your plan is completed you'll be in a better financial position moving forward.
While you don't need the permission of the court to take a new job, you should get court approval of any new debt.
Disposable income is the cornerstone of every Chapter 13 case. This refers to the amount you have left in your budget after you subtract necessary and allowable expenses from your monthly income. In a Chapter 13 case, you're required to pay this disposable income to your creditors.
If you get a new job and your income rises, you may have to pay more to your creditors. However, this is not always the case. If your allowable expenses rise by the same amount, you may not have to modify your payments at all. For example, if you get a $10,000 annual pay raise but have to move from a small town to a big city, your increases in rent, food and other expenses could easily eat up that entire amount, leaving you with no increase in disposable income.
If your income decreases after you take a new job, you'll want to contact your trustee immediately. If you can't make your payments, your case likely will be dismissed. To avoid this, you'll want to work with your trustee to lower your payments in the case of decreased income.
Other options are available if you can't meet your monthly payments, such as the conversion of your case to a Chapter 7. You also could request a hardship discharge.