What happens when a person has been in Chapter 13 bankruptcy for a period of time and their income goes down? Can they amend their payments? Keep reading to find out what the options are. Remember that the key is to take action before you’re forced to default on your bankruptcy and start all over. Contact a bankruptcy attorney Chapter 13 in La Verne CA for help today.
You can petition the court for lower payments
If your income drops during your Chapter 13 bankruptcy and you can no longer afford your monthly plan payment, you can petition the court to amend your plan and lower your payment amount. The court’s decision on whether or not you can reduce your plan payment is contingent on a variety of criteria.
The amount of your monthly plan payment, in addition to your income, is determined by:
- Your expenses
- The many kinds of debts you have
- The value of your nonexempt property
The final two variables may have an impact on whether or not your payment can be decreased.
The kinds of debt you have will impact your options
Debts come in a variety of shapes and sizes. Certain debts (like as alimony, child support, and priority tax payments) must be paid in full during the course of your plan (which is normally no longer than five years). If these debts account for the majority or all of your plan payment, the court may not enable you to reduce your payment unless you agree to prolong your plan period beyond the maximum permitted.
This means that, in some cases, even if your income decreases, you may not be able to reduce your payment amount. However, if any of your obligations are not needed to be paid in full (such as credit card debt, medical expenses, or personal loans), you may be eligible to reduce your plan payment. The key is to talk to your bankruptcy attorney Chapter 13 in La Verne CA.
The value of your nonexempt property will impact your options
You must pay your unsecured creditors at least as much as they would have gotten in a Chapter 7 bankruptcy under Chapter 13. The best interest of creditors test is what it’s called. Because your unsecured creditors would have been entitled to the nonexempt worth of your property in a Chapter 7 bankruptcy, your plan must pay them an amount that is equivalent to what they would have gotten if you had filed for Chapter 7 bankruptcy.
If you have to pay a set amount to unsecured creditors as part of your Chapter 13 plan, it may impair your ability to minimize your payments.
How to make changes to your chapter 13 plan
If you wish to lower your payment amount after the court has confirmed (approved) your Chapter 13 plan, you’ll need to submit a request to alter your plan with the court and serve it on the bankruptcy trustee as well as all of your creditors.
In most situations, you’ll need to request a hearing date, provide a written statement explaining why your plan payment should be decreased, and propose a modified Chapter 13 plan to the court to file a petition to modify. The trustee and your creditors will have the opportunity to study and object to your proposed plan. If the trustee or a creditor objects to your proposed plan, the judge will give each party an opportunity to explain their viewpoint.
To learn more about how a bankruptcy attorney Chapter 13 in La Verne CA can help, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free consultation.