As per lawyers of Los Angeles based law firm, your proposed repayment plan is the most important document in a chapter 13 bankruptcy case. It informs which creditors will be paid and the amount of your monthly payment plan. Unfortunately, a lot can happen between the duration of your 3-5-year repayment plan which can change it. However, you can modify the approved plan as per the changes in your situation.
Circumstances that can lead to a modification of your existing chapter 13 repayment plan include job loss, reduction of income, increased expenses due to illness, or any emergency as well as giving back any property for which you were currently paying through your plan.
How to modify an existing repayment plan?
While filing for a chapter 13 bankruptcy case, you need to propose a repayment plan. This is reviewed by the creditors, bankruptcy trustee as well as the judge. Any objections to the terms of the plan are filed prior to confirmation of the plan. The confirmation might take place in a few months, so you can either modify the plan prior to confirmation or after it.
Modifying plan prior to confirmation
Since the plan is not yet confirmed, modifying it is relatively easy. Different courts have specific procedures regarding modification of repayment plan; though usually you simply need to file the amended plan with the court and provide a copy of it to the bankruptcy trustee and your creditors. You also need to provide them with time to review it and file objection if required.
Modifying plan after confirmation
If the plan is already confirmed, you need to file a motion with the court to get a hearing date for the same. You need to explain why you need to modify the terms of the approved plan and provide supporting documents for the same. In case you wish to reduce the payments, you need to provide proof of changed circumstances (pay stubs for reduced income). If no objections are filed, the motion is granted by the court.
Circumstances under which modification of plan may not work
While filing for Chapter 13 bankruptcy, certain debts (priority and secured debt arrears) need to be paid in full. However, the duration of the plan cannot be more than five years from the date of filing. This can take place when the payment amount is sufficient to pay off the debts on schedule. Usually, you can reduce or limit the amount being paid to unsecured nonpriority creditors. however, if you are paying only your priority creditors through the repayment plan, you might not be able to modify the plan. To know more about the debts which need to be paid in full and your repayment plan, you can call(888-297-6203) to consult experienced bankruptcy lawyers.