My Road Back From Bankruptcy

Posted on: 24 March 2015

When you enter into a Chapter 13 bankruptcy, you will be placed on a repayment plan. This plan will stay in place for a predetermined amount of time, and you will be required to make the payments specified in the original arrangement. While this plan normally doesn't change, there are exceptions to the rule. If your circumstances change significantly, the trustee handling the case may decide to modify the plan, and here are three changes that could lead to this.

Your Income Changes

After filing for Chapter 13, a bankruptcy trustee will be assigned to you. This trustee is the person responsible for monitoring your case and is the only person that has the authority to modify your repayment plan.

You are required to report all changes in income to the trustee when they occur, and you should realize that the trustee may change your payment amount based on these changes. Your payment amount could go up or down though, and this is determined by the type of change that took place with your income.

For example, if you get a raise at work or receive a large bonus, the trustee might decide to increase your payment amount. If you receive more child support income or any other type of income, the trustee may also decide to increase your amount.

On the other hand, your payment amount could drop if you lose your job or change to a job where you receive a lower income.

You Acquire New Debt

You may also request a payment change if you acquire new debt of some kind. For example, if you get sick and require hospital care, you may end up with a huge hospital bill. The trustee may allow you to add this debt to the Chapter 13 plan, but this may require paying a little more each month.

Keep in mind that when your Chapter 13 repayment plan ends, all unsecured debts you owe (which includes hospital bills) are discharged. This means that these remaining balances are forgiven, and you will never have to repay them.

You Give Up an Asset

The other reason a trustee will modify a Chapter 13 case is if a person gives up an asset he or she owns. This typically only includes major assets, such as a house or car. When you initially set up your Chapter 13 plan, it will be based on the assets you own, your income, and the debts you have. With this information, the trustee creates a plan, but the plan can change if you give up a major asset you own.

For example, if you decide that you do not want your house, you could contact the trustee to let him or her know that you are giving it up. This could be through a sale of the house, or you could let the bank take it from you. Because this changes your financial situation, the trustee may be willing to modify your plan.

The new plan will allow for the rent that you must now pay for a house or apartment, and will account for the decrease in debts you have. Because of these things, the payment plan will decrease.

If you find that you are really struggling with your repayment plan, you could file for a hardship discharge. This would allow you to get rid of some of the debts you have, but getting approved for a hardship discharge is not always easy. If you have any questions or concerns relating to your Chapter 13 case, contact the bankruptcy attorney that handled the Chapter 13 case for you.