One of the primary concerns for those considering Chapter 13, or repayment plan, bankruptcy is what may happen to their finances during the multi-year case. If your financial situation changes for the worse, will you still be locked into an unaffordable repayment plan? Or can you get relief from the unexpected?
In fact, you can get relief in many circumstances. To help you decide if Chapter 13 is still right for you, here are answers to some of the most important questions about altering your payment plan.
Can Your Repayment Plan Be Altered?
The bankruptcy court understands that a debtor can't foretell the future. While you can put many aspects of your financial life on hold until your case is completed, unexpected changes can still happen. This may range from a divorce, the loss of a spouse, or a job loss to family emergencies and natural disasters.
To accommodate this, the court does allow petitioners to request a motion to lower their payment plan or make other changes. It's not guaranteed, though. And the creditors can make an objection that the court will evaluate when deciding.
What Options Will You Have for Relief?
The most common way to handle a reduction in income is to prepare a new, lower repayment plan with your attorney and present it at a court hearing. If it represents the best outcome for the creditors, the court will often approve it. Another option is to request a change from a three-year payment plan to the full five years. This lowers monthly payments by extending the length of time required to pay it back.
You should also consider whether now is the time to let go of a secured asset you were trying to keep. For instance, perhaps your house is no longer affordable, even after the bankruptcy ends. If so, selling it would relieve you of the mortgage. Your repayment plan amount may or may not change depending on what you now need to pay for housing.
Finally, you can also request a change from Chapter 13 to Chapter 7. If Chapter 13 was not previously available to you based on a higher income, it may now be an option. And if you avoided it before, although it would have been allowed, it may be good to reevaluate this. Liquidation bankruptcy is a one-time hit and gets you moving forward faster.
Where to Start
Whether you're still deciding if Chapter 13 is a good choice or if you've experienced financial changes under an existing case, start by meeting with an experienced bankruptcy attorney in your state today. With their help, you'll soon choose the best path with confidence and optimism. Reach out to a Chapter 13 bankruptcy law firm near you to learn more.