Modifying a Chapter 13 Repayment Plan

The decision to file for bankruptcy has been made. You have sought out counsel for assistance and Chapter 13 papers have been filed and you have been approved for a repayment plan. Life is good! Life is also changeable. Circumstances change. Five years is a long time for circumstances to remain static. What happens if what you started paying monthly is no longer a viable option for you?

All is not lost. There is a way to change your Chapter 13 plan components. The Court may be petitioned for a modification due to changes in your circumstances. Modifications are most often requested by the debtor, but it is not unheard of that a trustee or an unsecured creditor may make such a request. Modifications are common occurrences and they are not as difficult as one might think. First and foremost, PLEASE contact your attorney as soon as is practicable regarding your change in circumstances. Do NOT wait until you are two or three payments behind in your repayment plan. You will most likely be asked to provide updated information regarding your current income as well as your most recent income tax paperwork. Your situation should be reviewed with an eye toward deciding whether you should request a forgiveness of a portion of your payments or if your entire plan needs to be restructured.

Obviously, the reason you are requesting a modification must have merit. There are many reasons to request modifications. Some common reasons include:

  • Loss of income due to ill health
  • Loss of income due to unemployment
  • An increase in your expenses (NOT due to your incurring NEW DEBT)
  • Need to add a debt which was originally overlooked
  • Claims sent to the Court are higher than the originally estimated sums worked up for the plan
  • Removal of a debt which has been paid

Each Court has its own rules regarding how requests for modifications should be filed. Generally speaking, if the plan needs to be restructured expect your attorney to file a Motion to Modify Plan After Confirmation. The motion will include the changes you need to make, including any back payments for which you may be seeking forgiveness. Copies of such paperwork will be given to all your creditors and the trustee. Be advised that creditors have a right to object to a modification request.

The next step will probably involve attendance at a hearing. Your attorney's job at this hearing is to convince the Court that your reasons are compelling and a modification will be in everyone's best interests. If no one objects to the modification request, it is granted and takes effect IMMEDIATELY. Be advised that your present income and ability to make new proposed payments will come under scrutiny. If your new income level does not pass muster your request could conceivably be denied. Also know that if your situation is of a temporary nature the Court may grant a TEMPORARY modification until you back on an even keel.

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