Life's unexpected turns can make keeping up with Chapter 13 bankruptcy payments challenging. Whether you're facing a job loss, medical emergency, or other financial setbacks, it's important to know that you have options. Let's explore how Chapter 13 plans can be modified to help you stay on track with payments.
Chapter 13 Repayment Plans
Chapter 13 bankruptcy allows individuals to create a structured repayment plan to address their debts while protecting their assets. These plans typically span three to five years, during which you make regular payments to a bankruptcy trustee who distributes the funds to your creditors according to a court-approved plan.
However, even the most carefully crafted plans can become unsustainable when life throws curveballs your way. Common challenges that might necessitate a plan modification include:
- Job loss or reduction in income
- Medical emergencies or illness
- Divorce or separation
- Unexpected major expenses
- Changes in family circumstances
Chapter 13 Plan Modification
The good news is that Chapter 13 plans are designed with flexibility in mind. You can modify your plan both before and after court confirmation, though the process differs in each case.
During the initial phase of your bankruptcy, before the court confirms your plan, modifications are relatively straightforward. This period can last anywhere from two months to over a year, depending on your jurisdiction. To modify your plan during this time, consider the following steps:
- File an amended plan with the court
- Provide copies to your creditors and trustee
- Allow time for review and potential objections
- Await court approval of the modified plan
Since the plan hasn't been finalized, these early modifications typically face fewer hurdles and require less formal documentation. However, once your plan has been confirmed by the court, the modification process becomes more structured. You'll need to do the following:
- File a Notice of Motion Under LBR 3015-1(n) to Modify Plan with the court
- Provide detailed documentation of your changed circumstances
- Explain why the modification is necessary
- Submit proof of your current financial situation
- Attend a hearing if required
What Is a Chapter 13 Hardship Discharge?
When modifications aren't enough to make your plan workable, you may be eligible for a Chapter 13 hardship discharge. This option provides relief when circumstances beyond your control make it impossible to complete your plan payments.
To receive a hardship discharge, you must demonstrate to the court that:
- Your inability to complete the plan is due to circumstances beyond your control.
- Your situation is likely to be permanent rather than temporary.
- You've paid unsecured creditors at least as much as they would have received in a Chapter 7 bankruptcy.
A hardship discharge is more limited than a standard Chapter 13 discharge. You'll likely remain responsible for the following:
- Priority debts
- Secured debt obligations
- Student loans
- Most tax debts
- Child support and alimony
- Criminal fines and restitution
- Debts from intoxicated driving incidents
Concerned About Your Repayment Plan? Contact Us!
If you're struggling with your Chapter 13 payments, don't wait until you fall behind to seek help. The team at Licata Bankruptcy Firm can explain how the repayment process works and advise you on how to draft a payment plan that works well considering your current situation.
Call (417) 213-5006 to discuss modifying your Chapter 13 repayment plan.
