Unlike Chapter 7 bankruptcy that eliminates most debts, Chapter 13 bankruptcy allows you to consolidate your debts, potentially negotiate lower payments, and repay all creditors over a period of three to five years. This plan works well for most filers as long as their financial situation doesn’t change too much during the repayment period. However, job loss happens and can affect the ability to stick to the agreed-upon payment plan when filing Chapter 13 bankruptcy.
Post-Confirmation Chapter 13 Modification
While it’s tempting to panic if you lose your job, especially when it comes as a surprise to you, Chapter 13 lawyers can assist you in working through this situation. As a client of CMC Law, your Chapter 13 bankruptcy lawyer will propose a motion to the bankruptcy court known as post-confirmation Chapter 13 modification. A bankruptcy judge will consider your new circumstances and can decrease the total monthly payment you make to all creditors or implement other adjustments if necessary.
Here are some other situations that may qualify you to seek a post-confirmation Chapter 13 modification:
- Loss of income due to health challenges
- You need to remove a debt that you have paid since your original bankruptcy filing by selling one or more pieces of secured collateral
- An involuntary increase in expenses not due to a debt such as the need to pay for healthcare services
- The claims you originally filed are higher than estimates you have received after a judge approved your Chapter 13 bankruptcy plan
- You need to include a debt that you had prior to filing for bankruptcy but that you did not include in the original petition
After verification of your change in financial circumstances, the most common outcomes are for a bankruptcy judge to lower your monthly payment obligation to creditors and/or extend your total repayment plan.
As with your original Chapter 13 bankruptcy filing, your creditors have the opportunity to request clarification or object to the new plan. Additionally, the bankruptcy court may only approve a temporary adjustment if you expect your financial challenge to resolve in a short time.
Chapter 7 Bankruptcy Might Be More Appropriate
If the loss of your job leaves you with no income whatsoever, you may wish to discuss converting your original Chapter 13 bankruptcy filing to a Chapter 7 with your Chapter 13 bankruptcy attorney. If approved for the Chapter 7, it would eliminate most debts other than child support, lawsuits, alimony, student loans, and past due taxes. Whether you want to consider changing your bankruptcy filing status or not, consulting with a Chapter 13 bankruptcy lawyer from CMC Law is a good idea any time that you experience significant changes in your financial situation.
Considering Filing for Bankruptcy or Need to Adjust an Existing Court Order?
Assisting clients who wish to file Chapter 13 bankruptcy or modify it after the fact is just one of the many legal services we offer at CMC Law. If you find yourself struggling with debt that you know you cannot repay, we invite you to schedule an appointment with us for a free bankruptcy evaluation.