In Chapter 13 bankruptcy, one of the most important documents you file with the court is your proposed repayment plan. Your repayment plan outlines which creditors you intend to repay and how much your monthly plan payments will be. Because most Chapter 13 plans are three to five years long, many things can happen during that time that can make your plan unworkable. But you may be able to modify the terms of your plan to fit your changed circumstances. Read on to learn more about how to modify your Chapter 13 repayment plan.
For more information on the basics of Chapter 13 plans, see our topic area on The Chapter 13 Repayment Plan.
Reasons to Modify Your Plan
There are many circumstances that might lead you to modify your Chapter 13 repayment plan. The following are some of the most common reasons you may need to modify your plan:
- job loss
- pay cut or other reduction in income
- increased expenses
- an unexpected emergency, and
- surrendering (giving back) an item of property that secures a debt currently being paid off in your plan.
How to Modify Your Chapter 13 Plan
When you file your Chapter 13 case, the judge, the bankruptcy trustee, and your creditors all get a chance to review your proposed plan. If the trustee or one of your creditors doesn’t agree with the terms of your plan, it can file an objection to confirmation (approval) of the plan. The terms of your plan are finalized only upon confirmation by the court, which can take several months depending on where you live. Fortunately, you can modify your plan before or after the court confirms it.
Modifying Your Plan Prior to Confirmation
Because your plan has not yet been finalized by the court, it is generally easier to modify it prior to confirmation. Each court has its own procedures on how to modify repayment plans before confirmation. But in most cases, you will simply need to file an amended plan with the court and provide a copy to your creditors and the trustee, giving them a chance to review it and file objections if they wish to do so.
Modifying Your Plan After Confirmation
If the court has already confirmed your plan, you will typically have to ask the court to modify your plan by filing a motion and obtaining a hearing date. When you file your motion to modify, you will have to explain why you need to change the terms of your plan. You must serve the motion, notice of hearing, and all supporting documents on the trustee and your creditors.
If you are trying to reduce your payment amount, you will need to attach proof of your changed circumstances (such as recent pay stubs showing a reduction in income) to the motion. If no one files an objection to your modified plan, the court will normally grant the motion.
When Modifying Your Plan May Not Work
When you file for Chapter 13 bankruptcy, you must pay off certain obligations (such as priority debts and secured debt arrears on assets you want to keep) in full through your repayment plan. But your plan can’t last longer than five years from the date you filed your case. This means that your new payment amount must be sufficient to pay off all required debts on time.
In most cases, you can lower your payment by reducing or eliminating the amount you were paying to nonpriority unsecured creditors (such as credit card companies). But you may not be able to reduce your payment if your plan is only paying priority creditors.
To learn more about the debts that must be paid in full through your repayment plan, see Debts You Must Pay in Chapter 13 Bankruptcy.