Can I Use Unemployment Income to Qualify for Chapter 13 Plan Payments?
Quick answer: Yes! Unemployment income can be used to fund a new or existing Chapter 13 plan. At the time of this blog post many Michiganders are on furlough or dealing with temporary job loss due to the Covid-19 Coronavirus. This time of general uncertainty and loss of income is worrisome, especially for those already struggling with debt.
If you are behind on debt payments (i.e. home or vehicle), a Chapter 13 debt consolidation program might be an ideal choice to handle monthly payments during a difficult time. The Chapter 13 Debt consolidation plan allows you to gain court protection from creditors and reduce and eliminate debt. The Chapter 13 plan considers and allows many different income sources to fund the program, including:
- Unemployment or underemployment income from the UIA or over government source;
- Alimony or spousal support;
- Rental income (i.e. roommate);
- Family assistance;
- Social security and pensions;
- Income from job, contract job or self-employment, etc.
In many cases, it may be one or a combination of the above income examples that we use to fund the debt consolidation plan.
Key Chapter 13 Reorganization Plan Feature – Flexibility!
Another unique aspect of the Chapter 13 plan is the flexibility to modify and adjust the repayment plan based on a change in your circumstances. Some of the most common reasons for a modification to the Chapter 13 plan include:
- Short term loss of income
- Job loss
- Marriage or Divorce
- Increase in family size
- Mortgage interest rate adjustment
- New purchase during the repayment plan, such as a vehicle.
This means that as your circumstances change, we can adjust the repayment plan to reflect those changes.
Other Chapter 13 Plan Benefits
In addition to flexibility of income sources and the ability to make plan payment adjustments as needed, the reorganization plan has many other unique and powerful benefits that make it a superior debt consolidation program. Some of the distinct benefits of filing Chapter 13 bankruptcy include:
- Court protection from creditors throughout the 36 – 60-month repayment process;
- Stop home foreclosure or sheriff’s sale;
- Prevent vehicle repossession;
- Favorable repayment options for past income taxes;
- Assistance in paying back student loans;
- Legally eliminate unsecured debt that you can’t afford.
Improve Your Credit
The most common perception is that filing for bankruptcy has a negative effect on your credit. In reality, the opposite is true. For most people, filing for bankruptcy will actually improve their credit score.
Here are the top two reasons why filing a Chapter 13 will have a positive impact on your credit score:
- Chapter 13 improves your debt-to-income ratio: This factor alone influences 30% of your credit score. By focusing on paying down principal debt as well as eliminating any remaining unsecured debt obligations at the completion of the program, your debt-to-income ratio will improve throughout the course of the repayment plan.
- The Chapter 13 plan provides consistent and timely payments to your creditors. Recent payment history is the largest component of your credit score, comprising 35% of your total score. While you are under Chapter 13 protection, there are NO late reports to the credit bureau in addition to establishing an organized and consistent method of paying your creditors each month.
For more in depth information, visit our “bankruptcy and credit score” page.
Free Consultation, Expert Advise
We are here to answer your questions and help you find the best debt resolution option. We are open virtually and still offering all services and even same day legal protection. Call us today at 866-261-8282 to speak to a licensed Michigan debt resolution attorney or schedule an appointment online.