24 Oct Does the Payment in my Chapter 13 Plan Ever Change?
As you may know the Bankruptcy Code provides that Chapter 13 plans must last at least three years but no more than five years. As a practical matter, most of the Chapter 13 plans I file in my Atlanta area bankruptcy practice end up as five year plans (this is because the disposable income calculations built into the means test result in very few cases that would allow for a three year plan).
As I tell my clients, five years is a very, very long time. If you think about it, what is the likelihood that a budget you file today will not change over the course of five years? You or your spouse may have different jobs, your monthly expenses will almost certainly go up, and you will no doubt have unexpected expenses, and perhaps an unexpected windfall.
Given the almost 100% likelihood of changes to your budget, I have always thought that the insistence by Chapter 13 trustees that you pay every cent of your disposable income into your plan, with no contingency for emergencies or changes is downright silly. In the Northern District of Georgia, for example, we used to have an expedited procedure to obtain a two to three month suspension of plan payment obligations – debtor’s counsel could obtain this suspension by writing a letter to the trustee and obtaining a written response back approving or disapproving the request. Now, we have to file a Motion, schedule a hearing, sit for 3 hours waiting for the calendar call, then getting the approval that way. A good use of everyone’s time….not!
If you experience a significant loss of income or increase in expenses you can file a motion for a post-petition plan modification, but the process is unwieldy and time consuming and you very well may have to pay additional attorney’s fees for such a change. In my opinion, the Bankruptcy Code ought to provide for the likely contingency of temporary job loss, emergency cash needs for things like funerals or family emergencies.
If you know for certain that you will experience a reduction in income or an increase in expenses (or the converse), you can build this eventuality into you plan by submitting what is known as a “step” provision into your plan. A step provision might provide, for example that “in March, 2010, the debtor’s plan payment shall decrease by $350 to reflect an anticipated budget expense of $350 allocated to pay a student loan that goes into payment status in March, 2010 and continues for the remaining term of the plan.”
The step plan may provide for an increase to the plan payment if a debtor’s child support obligation comes to an end halfway through the plan.
Obviously if you know for certain that your income or expenses will change during the course of your plan, let this fact be known to your lawyer so that your original plan can anticipate these changes. Otherwise, you will be subject to the unduly cumbersome, expensive and time consuming procedures of the bankruptcy courts to modify your plan.
by Jonathan Ginsberg, Atlanta bankruptcy lawyer.
Jonathan Ginsberg, Esq.
Latest posts by Jonathan Ginsberg, Esq. (see all)
- How Bankruptcy Can Solve Your “Too Expensive Car” Problem - June 6, 2017
- Why I Prefer Chapter 7 Bankruptcy to Chapter 13 Debt Consolidation - May 19, 2017
- Mistakes to Avoid: How to Recognize When and Where You are Exposed Financially - March 7, 2017
- Are You Exposed? - February 6, 2017
- Is Your Car Loan Underwater – What Are Your Options? - January 6, 2017