Changing in Mid-stream

Chapter 13 bankruptcy, known as the wage earner’s plan, is available to individuals. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause”. If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.

After a debtor’s plan has been approved, the debtor can begin paying the trustee the debt payments outlined in the Chapter 13 debt repayment plan. Debts which arise after the initiation of the debt repayment plan are the responsibility of the debtor. Under certain circumstances, the debtor can file a motion to have the plan changed to reflect the new circumstances.

For example, a person who is paying child support will list the support payment on the proper schedule when filing for bankruptcy. The original support payments will be included in the approved plan and will be dispersed by the trustee. What happens if some other court raises or lowers the child support payments after the plan has been approved? The debtor can get the trustee to make an adjustment on the plan by petitioning the court for the change. The court most likely will not reduce the amount the debtor is paying to secured and priority creditors unless they can modify the underlying debt.

A more common example can occur when a debtor has unexpected car repairs. Debtors need their car to go to work to make their payment, but there are extenuating circumstances that might prevent them from getting the court to reduce the plan payment to reflect the large sum of money needed to make the car repairs.

When you make a debt repayment plan, you are asked to determine your disposable monthly income (DMI). Certain reasonable expenses are allowed in determining your DMI. For example, you are allowed an expense for operating two vehicles, including repairs. The expense should have been calculated in your DMI regardless of whether you own a vehicle or not. That means, theoretically, you have already been allowed an expense for any unexpected car repairs. Unless you can prove an unexpected hardship case, it is not likely the trustee will modify the payment plan. To avoid this situation, many people purchase a new car at the beginning of their plan. They build in the expense of the new car along with a warranty service agreement so they will have a reliable car for the duration of their plan.

If you are filing a Chapter 13 bankruptcy, you may need help from a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan area of Orange County, California, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

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