I have recently written about a situation where the debtor’s Chapter 13 Bankruptcy plan is failing for the reasons beyond the debtor’s control. One potential way to resolve this problem was to seek a hardship discharge. Today, I will describe another way of addressing this problem.
In a typical Chapter 13 Bankruptcy case, the debtor has to propose a monthly payment to repay his/her creditors over either 36 or 60 months. The length of the plan in either situation is substantial and carries with it some risks for the debtor. The primary risk is a substantial change in the debtor’s income, leaving him/her unable to make monthly payments approved by the bankruptcy court.
When a confirmed Chapter 13 bankruptcy plan is failing, the debtor should start thinking about having the plan modified in order to remain in Chapter 13 Bankruptcy. Under the applicable provisions of the Bankruptcy Code, the plan can be modified and the debtor can seek a change in the amount of the monthly payment or the length of the plan to fit the current circumstances.
Section 1329 of the Bankruptcy Code provides that the plan can be modified to:
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments;
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan; or
(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor.
If you are unable to make a payment on the plan on time, you should immediately contact your bankruptcy lawyer to determine if the plan can be modified. In order to modify the plan, the debtor must make a motion for modification. Such motion must show to the bankruptcy court new payments using documentation of the new income figures.
The advantages in keeping your Chapter 13 Bankruptcy include keeping the automatic stay in place; getting a discharge, and not incurring additional attorneys fees for converting to a Chapter 7 Bankruptcy. If the bankruptcy remains in place, your creditors will not be able to sue you or begin collections activities.
If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.