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Can you change your Chapter 13 repayment plan?

On Behalf of | Aug 16, 2022 | Chapter 13

In Chapter 13 bankruptcy, a person works out a repayment plan with the court. The plan, which typically runs three to five years, has to be approved by a bankruptcy judge at a confirmation hearing. 

A debtor has the chance to modify their repayment plan prior to the confirmation hearing. This may be necessary if there are errors in the plan if there have been changes to their financial picture (such as a change in income) or for other reasons allowed under the Bankruptcy Code.

Creditors and the bankruptcy trustee may object to the plan. The trustee is likely to object if they don’t think the debtor will be able to fulfill the payment requirements. Therefore, it may be necessary to modify the plan for it to be confirmed. When modifying their plan, a debtor needs to notify any creditors that the modification will affect.

What about modification after a plan is confirmed?

This isn’t especially common, but it may be necessary. For example, if a person receives a large inheritance, that would be considered something that would have a material effect on the plan. Likewise, maybe a serious injury or illness leaves them with significant medical debt that affects their ability to adhere to the plan, they might have to seek a modification.

In order to modify or amend a confirmed repayment plan, a person has to follow specific procedures. For example, they have to send a notice to their creditors, who must be given time to object. A new court hearing also has to be held.

Understanding the law around Chapter 13 bankruptcy

A Chapter 13 bankruptcy has some considerable advantages over Chapter 7, including not having to give up your possessions to pay your debts. Some people only qualify for Chapter 13 because of their income and assets. However, it requires knowing and adhering to the law and the terms of the bankruptcy and repayment plan. 

If the terms of the plan need to be amended at any point, it’s crucial to do it in accordance with bankruptcy law. That’s why having experienced legal guidance along the way is essential.