5 Ways to Modify Your Chapter 13 Bankruptcy Plan

In a Chapter 13 bankruptcy, you don’t fork over any property. Instead, you make a structured repayment plan. But can you modify this plan?

Ideally, you’ll pay off your debts in three to five years, and be on your way. But certain situations can crop up that throw a wrench into your repayment plan. Fortunately, there are ways to accommodate such circumstances.

Here are five potential ways to modify your Chapter 13 bankruptcy plan:

1. Unemployment. One of the most common reasons that a bankruptcy trustee will allow you to modify a Chapter 13 bankruptcy plan is the loss of income. If the income loss appears to be pretty long-term or permanent, the bankruptcy trustee will let you modify your bankruptcy plan.
2. Illness or unexpected medical emergency. Somewhat in connection to job loss is the loss of income due to a health crisis. Medical issues can affect your ability to afford your bankruptcy plan payments. In such a case, the court can modify the plan into a more manageable payment plan.
3. Unexpected expenses. If you’ve experienced an increase in your expenses which isn’t new debt, then the bankruptcy trustee can allow you to modify your bankruptcy repayment plan. Expense increases that justify a modification in the bankruptcy repayment plan can range anywhere from an increase in health care expenses to even the birth of a child.
4. “Surprise” debt. If you have a new “surprise” debt that you didn’t include in the original filing, then the bankruptcy trustee will allow the modification of the Chapter 13 bankruptcy plan to include that unaccounted for debt. If the debts included in the Chapter 13 bankruptcy are actually higher than your original estimates, then the bankruptcy trustee will allow the modification of the Chapter 13 bankruptcy plan to reflect the actual (higher) amount of the debts. Surprise debt isn’t the nice kind of surprise like a birthday party, but it can be helpful for a bankruptcy modification.
5. Paid-off debt. If you need to remove a debt that was paid off because you sold the property, then the bankruptcy trustee will allow the modification of the Chapter 13 bankruptcy plan. For example, if you sold a car or house, then the Chapter 13 bankruptcy could be changed to reflect that those debts were paid off.

If the bankruptcy trustee can’t modify your repayment plan to match your new circumstances, you might still have other options, like converting your case to a Chapter 7 liquidation bankruptcy or getting your debts discharged based on an “undue hardship.” To learn more, check out FindLaw’s comprehensive section on Bankruptcy.

Related Resources:

• Talk to an Atlanta Bankruptcy Lawyer (FindLaw)
• 5 Tips to Avoid Bankruptcy When Times Are Good (FindLaw’s Atlanta Bankruptcy News)
• The 5 Best Ways to Recover From Bankruptcy (FindLaw’s Atlanta Bankruptcy News)
• Get On-Call Access to Local Lawyers With a Legal Plan From LegalStreet (LegalStreet.com)
  (Disclosure: LegalStreet and FindLaw.com are owned by the same company.)