July 15, 2020

Chapter 13 Payment Plans Can Vary During the Course of a Bankruptcy

While most people believe that when they file for bankruptcy their payment plan is set in stone, this is not always the case. When you file for Chapter 13 bankruptcy, the amount you pay each month may vary each month.

For example, payments change greatly if you have an adjustable mortgage, your energy bills are different every month, and/or if you need to surrender or purchase a home or a vehicle. All these scenarios will cause your Chapter 13 budget to be affected. Because your budget is constantly changing, your plan may be adjusted accordingly.

Under section 1329 of the Bankruptcy Code, the trustee, the debtor, or one of the unsecured creditors can ask for a change in the payment plan anytime during your Chapter 13 bankruptcy case. The amount that your budget needs to change before your plan is adjusted depends on who reviews your plan. While all bankruptcy courts follow the Bankruptcy Code, states and districts enforce it differently. Typically, if you have a change of 10% in your budget for three or more months, your plan may be adjusted. If your expenses increase, it may be determined that you owe your creditors less money. If your income increases, it may be determined that you owe your creditors more money.

I strongly recommend speaking with an attorney to understand your Chapter 13 payment plan and how it can fluctuate throughout the duration of your case. Because the Bankruptcy Code is enforced differently depending on location, an attorney can clarify how it will be enforced in your case. Also, make sure that you notify your attorney of changes in your budget throughout the duration of your case, because you can get in trouble for concealing such changes.