You filed for Chapter 13 bankruptcy. Your Plan finally got confirmed, and you’ve been cruising along blissfully ever since. But what happens if there’s a bump in the road and you need to change course midway through your case?
Your Chapter 13 Plan is a living, breathing instrument. It’s filed and confirmed, but that doesn’t mean it’s been chiseled in stone like some sort of ancient text. If that were the case then filing for Chapter 13 would be the equivalent of putting on handcuffs for 36-60 months. That’s simply not the case.
After your Plan has been confirmed by the court, you can request a modification of the payment terms if your situation changes. Though most modifications are requested by the debtor, either the trustee or an unsecured creditor can also request a modification. Because modifications happen pretty regularly, they’re not at tough and you might expect.
Before requesting a Plan modification, make sure that your reason for the request is reasonable. Typical reasons to modify a confirmed repayment plan include:
- income loss because of unemployment or ill health
- increase in expenses that isn’t due to a new debt, like health care expenses
- you need to add a debt that wasn’t provided for in the original plan
- filed claims are higher than the original estimates (sometimes they come in post-confirmation, especially taxing authorities)
- to remove a debt paid by the sale of secured collateral
Each bankruptcy court has their own rules set forth by the judge that specify how the request must be filed. Your bankruptcy attorney should be knowledgeable about the entire process.
Before filing a motion for modification, review your current repayment plan and amend your income and expenses to reflect your current situation. Though the modified Plan usually requests a reduction in payments, a modification can also request that the payments are increased or that the total time period that the plan covers is extended or decreased.
You’ll typically need to file a Motion to Modify Chapter 13 Plan and serve the papers on all of your creditors as well as the court and trustee. Creditors get an opportunity to object to the planned modification.
If no one objects and the modified repayment plan meets the original confirmation rules, the judge will usually approve the modification after a hearing.
Approval of the modification request could be dependent on your ability to continue making payments on the new plan. If your new income level is too low for the court to determine that you will be able to consistently make payments, they may deny the request. When the hardship is expected to only last for a short-time, they can give you a temporary modification until the issue is resolved.
Jay S. Fleischman is a lawyer in Los Angeles who helps people file for Chapter 13 bankruptcy. In addition to helping people end their bills problems, Jay is always on the look out for a decent bagel and a slice of pizza on the West Coast.
Image credit: ebear313 (Flickr)