Pursuing a Chapter 13 bankruptcy is a way to take control of your finances by committing to a structured repayment plan. Still, as your circumstances change, you may need to revisit and revise this plan to achieve lasting debt relief. Does the law allow for this action?
Modifications to the repayment plan are sometimes necessary
Chapter 13 bankruptcy lets individuals reorganize their debts and establish a repayment plan that usually spans three to five years. During this time, your financial situation may change due to various factors such as:
- Job loss or reduction in income
- Unexpected medical expenses
- Birth of a child
- Divorce or separation
- Natural disasters affecting your property
When these changes occur, you may find it challenging to keep up with your current repayment plan. The bankruptcy code provides options for modifying your plan to accommodate these new circumstances.
The law provides flexibility in modifying your repayment plan
In Connecticut, as in other states, you can request a Chapter 13 repayment plan modification through a “post-confirmation modification.”
With this legal tool, you will need to file a motion with the bankruptcy court, explain your changed circumstances and propose a new repayment structure. Some possible modifications include:
- Extending the repayment period (up to a maximum of five years)
- Reducing the amount paid to unsecured creditors
- Temporarily suspending payments
- Adjusting the payment amount
Any modification must still meet the requirements of the bankruptcy code. For example, you must still pay certain priority debts in full, and secured creditors must receive at least the value of their collateral.
The bankruptcy trustee and your creditors have the right to object to your proposed modification. The court will then decide based on the facts of your case and the applicable laws.
Remember, the goal of Chapter 13 bankruptcy is to give you a fresh financial start. By working with an attorney to modify your plan when needed, you can stay on track to achieve that goal, even when life throws unexpected challenges.