When can you modify a chapter 13 payment plan?

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Question:

We got into a chapter 13 payment plan a few months ago but now the payments are becoming too much after a loss of income. When can you change the payment plan?

Answer:

A chapter 13 repayment plan is a course of action that a debtor proposes to solve his financial problems. When the plan is confirmed, it becomes binding. However, there are some instances when changes, sometimes referred to as plan modifications, may be permitted.

Changing Financial Circumstances

One of the primary reasons that debtors' requests for modifications are granted is due to a change in financial circumstances. Losing one's job or being laid off may mean that an individual does not have the means to make payments. A person who takes a lower paying job may need to reduce some or all of his payments. There are also circumstances where debtors may get better jobs or promotions and may want to increase their payments so that they can conclude their bankruptcy cases sooner.

Necessary Purchases

Debtors may be allowed to modify the terms of their payments to purchase health insurance for themselves or for their dependents. The coverage must be both reasonable and necessary. A modification for this reason is only permitted if there is insufficient disposable income to cover the costs of the insurance.

Hardship

Modifications are also permitted when adherence to a plan creates undue hardship. The term "undue hardship" can cover numerous situations. A common reason for granting a request on this ground is long-term illness that requires a debtor to be hospitalized.

If you are currently obligated to the terms of a Chapter 13 repayment plan and you need to make modifications, you should contact a bankruptcy lawyer. Getting approval requires filing a request and successfully navigating a hearing, which is best done with legal guidance.

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