Chapter 13 bankruptcy cases can last anywhere from three to five years, and a lot can happen during that time. Fortunately, if your circumstances change, bankruptcy law allows you to modify the Chapter 13 repayment plan so you can still accomplish your goals.
Any time a significant change occurs to your income or expenses, you should modify your Chapter 13 plan so that your payments are still manageable while sufficient to accomplish the plan's goals. This may mean paying some creditors less, reducing or raising your payment, giving up a house or a vehicle, or extending or reducing the length of your plan. You may need to modify your Chapter 13 plan if:
To modify a Chapter 13 plan, you must file a plan modification with the court. The modification should state why you need to modify the plan as well as how you wish to modify it. You should include supporting documentation as exhibits, if any. At this time, you should also file an amended Schedule I (income) and Schedule J (expenses) if you are modifying the plan because these have changed.
The trustee and your creditors will have a certain time to file an objection to your plan modification. If no objections are filed, you can submit an order to the court and your plan will most likely be modified. If there are objections and you cannot resolve them, you may have to go before the judge.
Example. Alice is in the second year of her Chapter 13 plan when she receives a pay cut at work. She can no longer afford her Chapter 13 plan payments while still supporting her family. She files an amended Schedule I to show her reduced income and files a plan modification with the court to reduce her plan payment.
Example. Joe files a plan modification to reduce his plan payments because his wife has just had a baby. He files an amended Schedule J to show the baby expenses. To reduce his payment and still make his plan work, he proposes to reduce the percentage paid to unsecured creditors. The trustee objects, and the court sets a hearing date. Joe tries to negotiate with the trustee, but the trustee will not cooperate. The court holds the hearing, and Joe convinces the judge that his plan modification is appropriate. The court enters an order modifying the plan to reduce the payment.
Once your plan is modified, you will need to change your wage order so the correct amount is taken out of your paycheck.
For more on how this works, see How to Lower Your Chapter 13 Plan Payments.