09 Jul Can I Shorten My Chapter 13 Plan Later?
Chapter 13 repayment plans can, and sometimes have to be, five-years long. Once again a court has reaffirmed that bankruptcy law allows those long-term plans to be shortened if the circumstances justify it.
Americans are funny people. We agree to buy a house on 30-year mortgages and often refinance those loans into another 30-years without much thought. We sign up to buy a car for six and even seven-year loans with even less thought. But when facing the prospect of possibly being on a cash-basis budget — don’t spend what you don’t have — for five-years in Chapter 13, many folks feel like it will “never end.” Even if they will save a ton of money. It’s exactly what the credit industry wanted when they lobbied for the 2005 amendments: Try to force more people into Chapter 13 and make them longer.
But over the last two years we have seen a string of decisions from Ohio, Kansas, Nevada, California and elsewhere concluding that the five-year commitment period isn’t a straight-jacket after all.
There are the decisions discussed in other posts here (and here, pending appeal) about shorter time periods if the means test shows you have no projected disposable income. But a recent case from Northern Ohio reaffirms the other, potentially far more important right to modify a repayment plan after court approval to potentially lower the payment and shorten the time period required.
In the case at issue, a married couple filed Chapter 13 together and confirmed a 5-year repayment plan together. Subsequently, the marriage failed and the woman continued on in Chapter 13. She asked the court to lower her monthly payment and shorten the time period to only three years.
Judge Russ Kendig approved the change. He concluded that Section 1329 of the bankruptcy code simply does not require the same commitment period as is required to gain initial approval of a Chapter 13 plan. You still have to have a change in your circumstances that justify revisiting the approved plan (losing half your household income would certainly qualify), repay as much as creditors would get if the case had been filed under Chapter 7, and you must propose the modification in good faith. But the critical fact was that she was not required to stick with a five-year plan.
Unfortunately Judge Kendig elected not to publish his thoughtful decision. Perhaps because he felt the law is well-settled in this regard. If so, then so much the better for us all. For attorneys wishing to review it though, the case is In re Hall, #06-61733, 2008 WL 2388628 (Bankr.N.D.Ohio 2008).
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