You usually must remain in a Chapter 13 bankruptcy plan for at least three to five years before you can receive a discharge. However, if you can no longer afford your Chapter 13 plan payments, all is not lost. Read on to learn more about modifying your Chapter 13 bankruptcy plan payment and how it can save your bankruptcy. (To learn more about the Chapter 13 plan, including what it is, what must be paid through it, and more, see our Chapter 13 Repayment Plan area.)
What Happens if I Don’t Make My Plan Payments?
After you file your Chapter 13 case, you must begin making monthly plan payments to your bankruptcy trustee. If you fail to make timely plan payments, then your case will likely get dismissed by the court.
Can I Modify My Chapter 13 Plan Payment After the Case Is Filed?
Since a Chapter 13 bankruptcy lasts three to five years, it is only natural that your life will not remain constant during that time. Events such as job loss, illness, or an unexpected emergency can affect your ability to afford your bankruptcy plan payments. If this happens to you, then you may be able to ask the court to modify your Chapter 13 plan payments to an amount you can afford.
When Can I Modify My Plan Payment?
When you start a Chapter 13 case, you file a packet of documents with the court. One of those documents is your proposed Chapter 13 plan. At this point, your proposed plan is essentially in a temporary probationary period until the court, trustee, and your creditors have a chance to review and object to it if they wish. If no one objects or all objections get resolved, then the court will "confirm" (finalize) your plan. However, you are allowed to modify your plan both before and after confirmation.
Modification Before Confirmation
Depending on the case or the court, it may take anywhere from a couple months to over a year before your case is confirmed. If your circumstances change during this time, you can usually simply explain your situation and file an amended plan for the trustee and your creditors to consider. If everything is satisfactory, then the court will confirm your latest filed plan.
Modification After Confirmation
If your bankruptcy plan has already been confirmed, then you will usually need to make a motion (ask the court) to modify your plan payments to an amount you can afford. The court and the trustee will ask you to explain why you need to modify your plan payments and will likely ask you to provide proof of your changed circumstances (such as a job loss or a reduction in income). If the court is satisfied with what you provide, it will order your plan payments to be changed for the duration of your case.
Limitations On Modifying Your Plan Payment
Certain debts must be paid in your Chapter 13 plan. These include certain taxes and domestic support obligations (these are priority debts) as well as any mortgage arrears on properties you wish to keep. So if your plan payment amount was only large enough to pay off required debts then you may not be able to reduce your plan payment unless you give up a property you were paying arrears towards. However, if your previous plan paid a percentage to your nonpriority unsecured creditors (such as credit cards), then you can reduce your plan payment by reducing or eliminating the portion going to these creditors. (To learn more, see Debts That Must Be Paid in a Chapter 13 Bankruptcy.)