Flexibility of Chapter 13 Plans

One of the really cool things about restructuring your debt in Chapter 13 is the flexibility to respond to changing circumstances along the way. Most of my clients are in a Chapter 13 for four to five years, and a lot can change in that time.

Think back–when was the last time you went five years without some significant change in your financial life–a job change, marriage, parenthood, divorce, illness, etc.

The general parameters of a Chapter 13 plan will always apply. There are certain kinds of claims that will have to be paid in full, like tax claims and child support. You will have to demonstrate that the plan is fair to your creditors, i.e., that you are devoting disposable income to the plan. But just as your initial plan may be based on your family budget at the time your case was filed, if the family budget changes significantly the court may allow you to modify your plan accordingly. Other changes may also necessitate modifying your plan. You may decide to move, for example, or a car may be wrecked. Your plan may be modified to reflect these real world changes, too.

Sometimes it is not feasible to modify a plan, but you may be far enough into the plan so as to justify a “hardship” discharge. In other words, the court allow you to stop payments early because, through no fault of your own, you cannot complete the plan, and the plan has gone on long enough to treat your creditors fairly.

You can also dismiss your Chapter 13 at any time; it is, after all, always voluntary. You can also convert a Chapter 13 case to one under Chapter 7, if circumstances change and that suits your needs.

To be frank, sometimes people in Chapter 13 are having a hard time meeting their obligations because they are trying to do too much–like keeping a house or car that they really can’t afford. Even if that is the case, it may still be appropriate to modify the plan. If circumstances have changed, discuss those changes with your attorney, and determine whether your plan can be modified, or if other actions ae appropriate.

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