Many people who become overwhelmed by debt have a job (or two) and a steady income. It’s just not enough to keep up with their expenses. Often, they’ve had an unexpected event like a serious injury or illness that left them with bills they can’t pay. If that’s your situation, you may not qualify for Chapter 7 bankruptcy – only Chapter 13.
Chapter 13 (often referred to as the “wage earner’s” bankruptcy) has its advantages over Chapter 7. Instead of having many of your assets liquidated to pay off your debts, you work out a three-to-five-year repayment plan with the bankruptcy court.
There are steps required before the plan is approved by a judge. Both your creditors and the bankruptcy trustee have a right to object to the plan, so modifications may be required before it’s presented to the judge at the confirmation hearing.
Can a repayment plan be modified after it’s approved by the judge?
A lot can happen in three to five years. It may be necessary (and to your advantage) to amend the plan. A plan can’t just be modified because the debtor wants to. There has to be a change in financial circumstances that would have a material effect on it. For example, say you get a large, unexpected inheritance or you become disabled and are no longer able to work. Either of those would change (for better or worse, respectively) your ability to keep up with the plan that was approved.
There are specific steps under the law required to modify a Chapter 13 repayment plan that’s already been confirmed. You must notify creditors and give them a chance to object. You’ll also need to have a new hearing regarding the proposed amendments to the plan.
It’s wise to have experienced legal guidance from the time you first consider bankruptcy. However, even if you didn’t have it previously, it’s important to have it as you seek to modify your repayment plan.