Some Consumer Debts Incurred after a Chapter 13 Filing Can be Included in Your Plan

24 Feb Some Consumer Debts Incurred after a Chapter 13 Filing Can be Included in Your Plan

Consumer debts” incurred after you file a chapter 13 case that are “necessary for the debtor’s performance under the plan” can be included in your bankruptcy case.  With chapter 13 plans requring payments for up to five years, it is likely that, while your case is pending, you may incur additional debts.  What happens with these unexepcted debts particularly if you are so strapped for cash that you can’t pay them?

Section 1305 of the Bankruptcy Code specifically allows for a class of consumer debts incurred after you file bankruptcy to be included in your chapter 13 case.  These consumer debts are those “necessary for the debtor’s performance under the plan.”  Often, a debtor in a bankruptcy case will encounter unforeseen circumstances for which additional credit must be sought.  For example, you may become hospitalized and incur a large medical bill.  Or, your car may break down and you need a loan to pay for repairs.  Once out of the hospital, you don’t have the money to pay the bill.  Or, if you don’t get a loan to pay for your car repairs, you may not be able to get your car out of the shop so you can go to work.  Whether a debt is “necessary” is subject to a case by case determination.

Were it not for Section 1305, any post-petition debt would not be discharged upon completion of the plan. However, once you add the post-petition creditor to your bankruptcy case, your plan must provide for the claim, that is, direct that the debt be paid.  Also, the creditor must file a proof of claim in order to get paid and, more importantly to you, so that any amount not paid through the plan is discharged.  In other words, your creditor has to consent to being included in your chapter 13 bankruptcy case.

So why would a creditor who did not know you were in bankruptcy agree to be paid through a chapter 13 plan and possibly not be paid in full.  There can be any number of reasons but typically, the creditor determines that it represents the best chance of payment.  For example, a debtor can modify his chapter 13 plan to provide for significant payment over a period of time such as where a 36 month plan is lengthened so that the debtor can pay the post-petition creditor over a longer period of time than what the creditor would perhaps like.  From a practical standpoint, the creditor may realize that if the creditor does not consent to being paid through the chapter 13 plan, the debtor could always convert his case to a chapter 7 and discharge any additional debt incurred up through the date of conversion.  In a typical no-asset chapter 7 case, unsecured creditors do not receive any money.

If you are in a chapter 13 plan and incur some unexpected obligations, all is not lost.  Under Section 1305, these post-petition debts may be added to your chapter 13 and ultimately discharged along with your other debts.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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