Chapter 13 bankruptcy allows consumers to voluntarily participate in a debt repayment plan that typically lasts three to five years. Chapter 13 consolidates the debtor’s debt payments into one affordable plan payment based on the debtor’s disposable income and the total amount of debt. When all goes well, a Chapter 13 debtor completes the repayment plan and emerges from bankruptcy with a fresh financial start. However, a lot can happen in three to five years. Sometimes debtors lose their jobs, get divorced or experience a substantial increase in household expenses, all of which can reduce their disposable income. When a Chapter 13 debtor’s financial circumstances significantly change, it may become necessary to modify the Chapter 13 plan.
The debtor can modify a Chapter 13 plan in several different ways. To keep a plan both feasible and affordable, a debtor may need to:
- Increase or decrease a fixed payment
- Revise a variable payment schedule
- Adjust the length of the plan
- Add an additional secured or priority claim
- Adjust the dividend being paid to unsecured creditors
- Provide for the surrender of secured collateral
- Excuse payment of a tax refund
- Any combination of the above
The requirements for modifying a Chapter 13 plan tend to vary from bankruptcy court to bankruptcy court. The best way to ensure you follow the correct procedure for this and all other Chapter 13 matters is to work with an experienced Kansas City bankruptcy attorney throughout the entire bankruptcy process.
Sometimes a Chapter 13 debtor’s financial circumstances change so drastically that even a plan modification cannot help. In those situations, debtors may need to consider voluntarily dismissing their Chapter 13 case or converting it to a case under Chapter 7. Although Chapter 13 debtors must meet certain eligibility requirements to convert, they generally can dismiss their case at anytime. If you experience difficulty making your Chapter 13 plan payments, a knowledgeable Kansas City bankruptcy lawyer can help you determine what actions to take.
While there are many potential benefits to filing Chapter 13 — averting foreclosure, keeping non-exempt assets, discharging certain debts — it may not be the right decision for you. If you are considering Chapter 13 bankruptcy, contact a qualified Kansas City bankruptcy attorney to learn more about the Chapter 13 process and all of your bankruptcy options.