In Chapter 13 bankruptcy, individuals pay off debts through an affordable three- to five-year repayment plan. The amount a debtor pays each month is determined by the amount of secured and priority debt included in the Chapter 13 plan, the dividend to unsecured creditors, and the debtor’s current household income and expenses.
So what happens if the debtor loses his or her job six months into the bankruptcy, or decides to give back a vehicle that the debtor is currently paying through the Chapter 13 plan? What if the debtor’s household expenses significantly increase, or the debtor and his or her spouse decide to separate?
Typically, if a debtor’s circumstances change during the course of a Chapter 13 bankruptcy case, the debtor can modify his or her Chapter 13 plan. Although the procedure for modifying a plan may vary from court to court, the U.S. Bankruptcy Code does allow for modification of a Chapter 13 plan after the bankruptcy court confirms it the plan.
According to the U.S. Bankruptcy Code, a Chapter 13 plan can be modified “upon request of the debtor, the trustee, or the holder of an allowed secured claim.” A debtor might seek modification of his or her plan to:
- Adjust the payment schedule
- Extend or reduce the length of the plan
- Add a secured or priority claim not previously provided for in the plan
- Provide for the surrender of collateral to a creditor being paid through the plan and the removal of that secured debt from the plan
- Reduce the dividend being paid to unsecured creditors
- Any combination of the above
It is important to work with an experienced Morris County bankruptcy attorney throughout the Chapter 13 process to ensure your case proceeds smoothly and that the Chapter 13 plan remains in your best interests. If your circumstances change, an attorney can help you determine whether a plan modification is necessary and what changes need to be made, in addition to preparing and filing the necessary paperwork in accordance with court policy.
Sometimes a person’s circumstances change such that Chapter 13 bankruptcy is no longer in his or her best interests. For some debtors, converting to a Chapter 7 bankruptcy case or voluntarily dismissing the Chapter 13 case turns out to be most beneficial.
A qualified Morris County bankruptcy lawyer helps Chapter 13 debtors make important decisions not only at the outset of their bankruptcy case but also anytime their circumstances change while the case is pending. To learn more about the bankruptcy process, contact a knowledgeable Morris County bankruptcy attorney today.