When your Chapter 13 bankruptcy begins, the payments under your Chapter 13 plan are based upon the secured debt you owe and the amount of money you have as “disposable income.” Your “disposable income” must be committed to repayment of your debts over between 3 and 5 years.
Your job changes; you get sick; your car is totaled.
So what happens now? You will need to modify your plan. So what do you do?
First, contact your attorney. Let your attorney things have changed. Don’t wait until you are two or three payments behind on your plan. Contact your bankruptcy attorney when your circumstances change.
You will have to provide your attorney with all of the facts related to your new situation. This will include updated income statements as well as last year’s tax returns. (You probably already provided last year’s tax return.)
It may be that your changes are simply temporary. You may need to seek a forgiveness of a portion of the payments or you may need to reformulate your plan completely.
Your bankruptcy attorney should file a Motion to Modify Plan After Confirmation. In it the changes you need to make, including any forgiveness of back payments, will be included. The Court will normally set a hearing so that your creditors an the Chapter 13
Trustee can comment and respond to your request.
It is likely that you will have to attend a hearing on the confirmation. At the hearing, the judge will approve or deny your Modification It’s very important that you give your lawyer sufficient ammunition to convince the court that it’s in the best interest of your creditors that the Plan should be modified.
If the court approves the Modification, then the Modification will immediately take effect. Five years is a long time. Circumstances change. If you have to modify your plan, be sure to contact your attorney early in the process.
If you are considering a Chapter 13 and are wondering where to turn, be sure to seek the advice of an experienced bankruptcy attorney. We help individuals and businesses from Knoxville, Sevierville, Maryville and Jefferson City evaluate the options available during these difficult times. Call and set up a free consultation with Knoxville Bankruptcy Attorney Dan Scott at 865-246-1050 today.
Photo Credit: Flickr: Deborah Fitchett