When Your Chapter 13 Bankruptcy Payments Are Too High: Modification Plan to Reduce Payments

When you filed for Chapter 13 bankruptcy, you were prepared for monthly bankruptcy payments that would help you regain financial control of your life. However, after falling on hard times, your repayment plan seems too high to manage and you worry you’ll fall behind again. Don’t worry–The Jones Law Firm is the Columbus and central Ohio bankruptcy firm that can help you reduce your Chapter 13 bankruptcy payments.

Chapter 13 Modification Plan

We know life happens. Be it the birth of a child, loss of a job, or a global pandemic, sometimes the repayment plan you had agreed upon as part of your debt reorganization just doesn’t work out. But that doesn’t mean all is lost. You can modify the terms of your repayment plan with a bankruptcy attorney to reduce the payment.

To modify your repayment plan, you’ll need to file a modification plan in court. Within that petition to modify, you’ll need to state why you need to modify your plan as well as how you will do so.

Such reasons you may need to modify your plan include but are not limited to:

  • Change in employment
  • Birth of a child
  • Surrendering a home or car
  • A creditor needs to be added to the plan
  • Your mortgage has changed

Along with the modification plan, you’ll need to supply any documents which highlight the changes in income and monthly expenses. From there, the trustee and creditors will either approve or deny the modification plan to your Chapter 13 bankruptcy.

Once the creditors and trustees have reviewed, the plan will be submitted to the court for approval. If the court does not approve, you’ll have to go before a judge.

Upon approval, you will need to update your paycheck deductions. It’s important to remember that you need to propose a plan you can reasonably repay.

How late can you be on a Chapter 13 payment?

If you begin to feel yourself falling behind on your monthly bankruptcy payments, the due date to pay may be a burden you just won’t make. However, if you are waiting on a paycheck, you may wonder how late you can be on a Chapter 13 payment before it becomes a problem.

In general, there isn’t a formal grace period for paying your bill, as you may have on other loans and payments. Under the Bankruptcy Code, payments must begin no later than 30-days after the case is filed and must be made every 30-days after. However, the court may change this due date to different installments, so be sure to understand this with your trustee. In addition, if you let your trustee know that you may be late with a bankruptcy payment, they likely will be accommodating so long as you do not make it a habit.

Can I reduce payments without modifying my plan?

If you believe your financial inability to make full payments is only temporary, there are ways you may be able to reduce monthly bankruptcy payments without going through the modification process.

Such changes you can make include:

  • Reducing the types of debts you have, and
  • Reducing the amount of nonexempt property you own.

If this is not possible, you may qualify for a hardship discharge. A hardship discharge is a court granted discharge of payments under your plan. Three conditions must be met to receive a hardship discharge:

  • Circumstances were beyond your control.
  • Your unsecured creditors received adequate payment.
  • Modification of your plan is not practical and has been denied by the courts.

It is important to note that a hardship discharge only removes unsecured, nonpriority debts. Debts you will still be responsible for include spousal and child support, taxes, etc.

In some extreme cases, you may be able to convert your Chapter 13 bankruptcy to a Chapter 7 filing. However, it is best to consult with a bankruptcy attorney before moving forward.

Modify Your Chapter 13 Bankruptcy Plan: Columbus and Reynoldsburg, Ohio Bankruptcy

When life happens and you have debts you cannot pay, we encourage you to contact The Jones Law Firm for a free consultation to discuss how we can help you modify your Chapter 13 bankruptcy repayment plan. With offices in Reynoldsburg, Ohio, The Jones Law Firm works with clients in and around Columbus and throughout central Ohio. Don’t delay. Your financial future begins now.