Can failing Chapter 13 plan be modified?

13 May Can failing Chapter 13 plan be modified?

When a confirmed Chapter 13 bankruptcy plan threatens to fail, the debtor needs to consider whether the plan can be modified to survive. The debtor can seek a change in the amount of the monthly payment or the length of the plan.

Debtors who experience a change in financial circumstances often seem to freeze, to forget that they have a lawyer who is committed to the success of their plan. They may never have heard that confirmed plans can be changed to fit the current circumstances.

The Bankruptcy Code in Section 1329 provides that the plan can be modified to

(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;

(2) extend or reduce the time for such payments;

(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan; or

(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor

My charge to those in Chapter 13 is to contact their attorney just as soon as they see they won’t be able to make a payment on the plan on time. Engage your attorney in looking for solutions to the plan.

The advantages in keeping your Chapter 13 plan alive include keeping the automatic stay in place; getting to discharge; and getting full value for the attorneys fees you’ve already paid.

There are other options including dismissal, conversion and a hardship discharge. You can’t tell which works best for you until you talk freely with your attorney. Don’t put your head in the sand if times are tough. Call your lawyer, gather up y0ur paystubs and your current budget information and get plannning.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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