Many people think that bankruptcy means they can’t save money or invest in their future. But that’s not necessarily true! If you’re currently in Chapter 13 bankruptcy, you may be able to put money into savings. Here’s what you need to know.
Why You Might Want to Save Money While in Chapter 13 Bankruptcy
There are a few reasons why you might want to put money into savings while in Chapter 13 bankruptcy. First, it can help you rebuild your credit. Second, it can give you a financial cushion in case of an emergency. And third, it can help you save for a major purchase like a car or a home.
Can I Put Money in Savings While in Chapter 13 Bankruptcy?
The answer is: it depends. According to the U.S. Department of Justice, “If you are an individual debtor in a chapter 13 bankruptcy case, subject to the approval of the bankruptcy court, you may contribute all or part of your disposable income to a plan that lasts for 3 to 5 years.” So, if you have extra money after paying your debts and living expenses, you may be able to put some of that money into savings.
However, there are some restrictions on how much you can save while in Chapter 13 bankruptcy. The U.S. Department of Justice says that “if your unsecured creditors would receive more if your case were converted to a chapter 7 liquidation, the court may require you to contribute any amounts in excess of what they would receive if your case were converted.” In other words, if your creditors would get more money if you switched to Chapter 7 bankruptcy, the court may make you use any extra money you have to pay them back instead of saving it.
What Are the Dollar Limit Restrictions on Saving Money While in Chapter 13 Bankruptcy?
The main restriction on saving money while in Chapter 13 bankruptcy is that you can only save up to $100 per month. Anything above that amount must be used to pay down your debts. Additionally, any money that you put into savings must be disclosed to your bankruptcy trustee. Aside from that cap, there may be additional restrictions imposed by the court system.
Court Imposed Restrictions
Additionally, the court may also limit how much money you can put into savings if it feels like you’re trying to game the system. For example, if you’ve been steadily increasing your savings while making minimum payments on your debts, the court may decide that you’re not really trying to repay your debts and force you to use your savings to pay off those debts instead.
So, can you put money in savings while in Chapter 13 bankruptcy? The answer is: maybe. It all depends on your particular situation and whether or not the court approves it. However, there are some restrictions on how much you can save while in Chapter 13 bankruptcy, so make sure to talk to an attorney before making any decisions about saving money while in bankruptcy.