How Can I Decrease My Chapter 13 Plan Payments?

01 Sep How Can I Decrease My Chapter 13 Plan Payments?

Your Chapter 13 Plan payment can go down if necessary.

Sometimes you file a Chapter 13 bankruptcy and life takes a turn for the worse.

Unemployment, illness, divorce, or a death of the family wage-earner can bring down your income significantly.

Does this mean the Chapter 13 Plan which was carefully set up calculating all income coming into the household is now doomed?

Not at all.

Chapter 13 Plan Payments Can Change

If you’re in a Chapter 13 bankruptcy you need to know that your Plan is modifiable at any time.

Just as it can increase when income goes up; it can decrease when income goes down or expenses go up.

The Down Side To A Modified Chapter 13 Plan

What if you’re in a five-year plan paying secured and priority creditors in full with nothing being paid to the unsecured creditors?

In this situation, your Chapter 13 Plan payment is already as low as it can be.

If the plan payment is lowered now, it will have to be increased significantly to get the plan paid in full in five years.

For Example. Let’s say you’re is paying a vehicle in a Chapter 13 bankruptcy. Your Plan payment is $625 per month and your last payment will be made at month 60. If you skip two months of payments, there is $1,250 that will need to be made up at some point. If your missed payments happen in Year 1 then you spread the arrears up over 50 months. But what if you miss a payment with only six months left in your Plan?

Head Off Trouble By Speaking Up Early

If you know that your income is going to be dramatically reduced, the first thing to do is talk to the bankruptcy attorney so you can plan out the best way of handling the reduced wages.

Don’t miss Plan payments and ignore your lawyer. Your Chapter 13 trustee will try to get your case thrown out of court, and modification will be far more difficult.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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