06 Jul Time for A Bankruptcy Tuneup Due To Rising Food and Gas Prices?
In or out of bankruptcy, climbing gasoline and food prices are having a huge impact on everyone. Many of my new bankruptcy clients were pushed over the edge by rising cost of living. Many current Chapter 13 bankruptcy clients are having problems in their current Chapter 13 bankruptcy cases when forced to chose between filing their tanks and buying food, and paying their Chapter 13 plan payment. At a time when money is tight, life isn’t just about tightening the belt but about making a substantial change in habits and practices.
For my Chapter 13 clients that have an open case, the first thing I am looking at is whether or not they qualify for a Modification of Chapter 13 Plan without any more sacrifice. Some Chapter 13 clients are able to lower their payments due to changed circumstances in their living expenses. This is determined on a case by case basis and usually involves submitting a revised income and expense schedule to the court, as well as filing a Motion to Modify Chapter 13 Plan.
The ability to modify a Chapter 13 Plan is one of the advantages to being in Chapter 13 instead of a Debt Management Program through a credit counseling program. Chapter 13 can be modified without the agreement of the creditors, as long as all of the bankruptcy laws are followed. Chapter 13 debtors have to pay all of their disposable income into the Chapter 13 Plan, it must be enough to pay the secured debt payments, tax/priority debt payments, and it has to cover any non-exempt equity that the client has.
With Chapter 13 bankruptcy clients who no longer have any extra room in the budget to cover the increased living expenses, we see if we can work with the client’s budget itself. This might involve eliminating or reducing non-essential items like cable, internet and/or cell phone usage. We look at utilities and gasoline usage and see if those expenses can be lowered. Harder choices might have to be made such as giving up a car or even the home. It also may be appropriate to look at whether or not a conversion to Chapter 7 bankruptcy is recommended. Chapter 7 bankruptcy may be the right choice for anyone who doesn’t have any funds left to pay towards debts, and who doesn’t have to catch up on secured debts or have non-exempt property to protect.
Anyone in a Chapter 13 plan should make sure to contact their attorney at the first signs of budgetary struggle since your attorney may be able to give your plan a tune up or make other suggestions to you before your situation is too bad to be helped.
By Susanne Robicsek, Charlotte North Carolina Bankruptcy Attorney
See also: Rising prices give rise to chapter 13 plan modifications by Andy Miofsky Illinois Bankruptcy Attorney
For Budgeting and financial tools: Hummingbird Credit Counseling Financial Learning Center
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