Chapter 13 bankruptcy is a powerful tool for people who are struggling with insurmountable debt. It allows you to pay off your unsecured debts monthly over a period of three or five years, and at the end of your repayment plan, the remaining debts will be discharged.
The size of your monthly payment is based on your disposable income — your gross income less amounts reasonably necessary for support of you and your dependents — at the time you file for Chapter 13. However, unforeseen events can make it difficult to keep up with your plan payments. If this happens, you may be able to modify your plan to make the payments more affordable.
Circumstances that might justify modifying your plan include the following:
- Job loss
- A pay cut or reduction in work hours
- Increased expenses
- Illness or medical treatment
- An unexpected emergency, such as an accident
If you need to modify your plan before it has been confirmed by the court, you must file an amended plan with the court and provide a copy to your creditors and the trustee. They will have an opportunity to object to the amended plan, but the court will likely approve the modification if based on legitimate reasons, such as those listed above.
A different procedure applies for modification after a plan has been confirmed by the court. You must file a motion, explaining the circumstances and providing documentation. You must also serve the motion, notice of hearing and all supporting documents on the trustee and your creditors. At a court hearing, you, the trustee and your creditors will have the opportunity to be heard. If the court approves the modified plan, you must follow it for the duration of the Chapter 13.
Here are some important things to keep in mind when seeking to modify your Chapter 13 plan:
- You can only modify your Chapter 13 plan once after confirmation.
- If you are behind on your plan payments, you will need to catch up before the court will approve your modification.
- If you are unable to catch up on your plan payments, you may need to file a new Chapter 13 bankruptcy or convert your case to a Chapter 7 case.
The keys to obtaining a beneficial modification are to be honest and upfront with the court about your financial situation and to provide compelling documentation to support your claims. Be prepared to answer the judge’s questions and be willing to negotiate with the trustee and your creditors to arrive at a mutually acceptable payment amount. An experienced Chapter 13 attorney can assist you in drafting and presenting a motion that can produce an optimal result.
Jeff Field & Associates helps consumers throughout Georgia discharge eligible debt through Chapter 13 bankruptcy. We have offices in Scottdale, Gainesville, Marietta, Lawrenceville, Douglasville and Athens. To schedule a personal consultation, call 404-381-1278 or contact us online.