Debtors in the Oak Park area who file for Chapter 13 bankruptcy do so for many different reasons. In some situations, your income may not allow you to file for Chapter 7 bankruptcy (in other words, you might not pass the “means test”). In other situations, you may not want a liquidation bankruptcy and feel confident in plans to repay creditors over the course of several years. In many cases, debtors file for Chapter 13 bankruptcy because it can prevent foreclosure and allow the debtor and his or her family to keep their home. Regardless of the reasons that you filed for Chapter 13 bankruptcy, what happens if you want to modify your payment plan?
Can you modify your Chapter 13 bankruptcy payment plan? What happens if you cannot make the payments outlined in your plan?
Background on Chapter 13 Bankruptcy
As a brief reminder, as the U.S. Courts website explains, Chapter 13 bankruptcy is one of two common types of bankruptcy for individuals. Typically, an individual or married couple will file either for Chapter 7 bankruptcy, which is a liquidation bankruptcy that allows for a discharge of all debts, or for Chapter 13 bankruptcy, which does not involve liquidation of the debtor’s assets and instead requires the debtor to make payments on a Chapter 13 payment plan over the course of three to five years. Once you complete the payment plan, you can have your debts discharged.
To be eligible for Chapter 7 bankruptcy, you must pass what is known as the “means test,” which, in brief, looks at your assets and income to determine whether you should be eligible to discharge your debts. If you cannot pass the “means test,” you still can be eligible to file for Chapter 13 bankruptcy. You do not need to pass any eligibility tests to file for Chapter 13 bankruptcy.
What if I Want or Need to Modify My Payment Plan?
As we mentioned, Chapter 13 bankruptcy comes with a payment plan. The court must approve this payment plan, and it must outline the payments that the debtor will make to the bankruptcy trustee for a period of typically three to five years. If you do not make payments on time—even if you miss a single payment—you may no longer be eligible to have your debts discharged at the end of your plan’s timeline. So, what can you do if you need to modify your payment plan?
Prior to filing your case, you and your bankruptcy attorney can modify your Chapter 13 payment plan as much as you wish. Once you file your case and must start making payments, however, you will need to ask the court to modify the plan. It can be possible to modify a plan based on a change in circumstances both before and after the court confirms your Chapter 13 plan. It is usually easier to modify prior to confirmation, though. Once you have filed your case but before the court confirms it, you may be able to just file an amended plan with an explanation of your change in circumstances (such as a change in income, unexpected medical emergency, or being laid off from work). At this point, your amended plan can be reviewed, and if everyone approves, the court can confirm it.
After your bankruptcy plan is confirmed, it gets a bit more complicated to modify your plan. At this point, you will need to file a motion to modify the plan and will need to provide evidence of your need to have the plan changed. Keep in mind, however, that there are certain debts that must be paid in a Chapter 13 bankruptcy, known as “priority debts,” and if the modification you are seeking would prevent such debts from being paid, you may not be able to modify your plan.
Discuss Your Options with a Bankruptcy Attorney in Oak Park
Chapter 13 bankruptcy plan modifications can be complicated, but an Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm to discuss your options.
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