Generally, a bankruptcy cannot be modified after it is filed. However, since Chapter 13 Bankruptcy is a repayment plan over 3-to-5 years, it is possible your circumstances may change since your bankruptcy was filed.
Below are five reasons to modify your Chapter 13 Bankruptcy.
1. YOUR INCOME HAS CHANGED
Be careful, this reason cuts both ways. If your income has gone down from a reduction of hours, layoffs, or change in career, then we can help you file papers to lower the plan payment.
There are limits, depending on your situation, to how low the payment can go. Conversely, if your income increases, then the Chapter 13 trustee can ask you to increase the monthly payment. The trustee asks for your tax returns every year to check for this.
2. YOU NEED TO BUY HEALTH INSURANCE
The bankruptcy code specifies that Chapter 13 debtors can lower their payments by the actual amount needed to purchase health insurance, if the premiums are not unreasonably high, and are similar to what other people pay for health insurance, or what the debtor has paid for health insurance in the past.
3. TO CHANGE HOW MUCH MONEY IS BEING PAID TO CERTAIN CREDITORS
Chapter 13 debtors can modify their plans to change how much money is going to certain creditors based on payments made to those creditors outside of the Chapter 13 plan.
For example, if you are catching up on your mortgage through a Chapter 13, and make an extra payment or two outside of the bankruptcy, then you can modify the plan to pay less to the mortgage company. Otherwise, the mortgage company would double collect.
4. YOU HAD CHILDREN
Everyone knows that children are expensive. Chapter 13 looks at the debtor’s household income and expenses to decide what the payment should be. If your household size increases, then your expenses will increase also.
If you can prove that your expenses have increased, then talk with your lawyer about modifying the plan to lower the payment. You might also qualify to convert the case to a Chapter 7 bankruptcy.
5. YOU GOT MARRIED OR DIVORCED
Family law and bankruptcy law often have a messy intersection. When a married couple files for Chapter 13 bankruptcy, and then gets divorced, the Chapter 13 does not end automatically.
It continues jointly with both spouses still participating. As long as one or both spouses makes all of the payments due under the plan, then both spouses will get the discharge, and the case will be successful.
In some circumstances you can sever the Chapter 13 into two cases, and one spouse may even be able to convert to a Chapter 7 bankruptcy.
If you started the Chapter 13 bankruptcy as a single person and then got married while the case was active, there are several possible outcomes.
Your household income increases because you now have a second worker to share expenses, or your household income decreases because the new spouse has little or no income.
These situations can cause your payment to move in either direction. You should talk with an experienced Minnesota bankruptcy attorney if you are thinking of changing your marital status while in a Chapter 13.
This is not a complete list of all of the reasons that you can change your Chapter 13 payments. These are some of the more common reasons for Chapter 13 modifications. If something similar to the above situations has arisen in your case, then you may be able to modify your plan, even if the reason isn’t listed above.
I represent each one of my clients all the way through the Chapter 13 bankruptcy process. My clients are free to call my office at any time to discuss their ongoing chapter 13 cases.
Photo Credit: Copyright Iv******@********me.com
