My husband & I filed for Ch. 13 in Dec. 08. are there any provisions for us to lower our bankruptcy payments due to loss of job

Asked over 5 years ago - Dothan, AL

My husband and I filed for Ch. 13 in Dec. 08 due to credit card debt and over $100,000 in medical bills due to daughters surgery not being covered by insurance. We do not own anything and we are paying back our two cars, a jewelry account & fees which total $241 every two weeks. My husband lost his job at the end of December and it took 4 months for him to find a new one and when he did, it paid significantly less. We have our bankruptcy payment taken out of my payroll check every two weeks but we are not able to pay our remaining bills on time and are now getting behind. Is there a way to petition our trustee to lower our bankruptcy payments due to our financial situation changing so dramatically?

Attorney answers (2)

  1. Jeffrey Daniel Larkin

    Contributor Level 15

    Answered . You should discuss one of 2 options with a licensed attorney in your state.

    Modify your Chapter 13 plan: This is an option if your financial circumstances have changed since the original filing. It also depends on the terms of your current chapter 13 plan since you cannot modify a plan to pay less than zero percent. If your chapter 13 is already a zero percent plan (ie. the percentage you have pledged to unsecured creditors) then modification to reduce the dividend to unsecured creditors is not an option. Depending on what the current length of your plan is, you may be able to modify the plan length to give you some breathing room. For example, if you are currently in a 3 year chapter 13 plan, it is possible to extend your repayment term to 5 years so that the total you repay is recast over 5 years instead of 3.

    Conversion to Chapter 7: You also have the option of converting your case to Chapter 7 if your current circumstances are such that you can no longer meet your monthly obligations. You or your attorney would have to file a notice of conversion and a new Trustee would be appointed and another hearing held. If you are looking to convert to Chapter 7 and have been paying your vehicle payments through the chapter 13 plan it is likely that you will be behind on payments and will need to get caught up if you intend to keep the vehicles. The reason this happens is because the balance you owe at the date you file your chapter 13 case is recast over the period of time you are in bankruptcy. For example, if you owed $10k on your car and had 3 years left on payments before you filed, and then file a chapter 13 plan and spread payments out over 5 years, the car creditor will be receiving less each month ($10k/36mo = $277.77/mo. vs. $10k/60mo. = $166.66/mo.). Bottom line here is to make sure you are aware this could happen upon conversion of your case. If you are in this position and want to keep your vehicles you should look at filing a motion to redeem the vehicles once the case is converted to chapter 7. There are lenders who will refinance your loan for the current market value of your vehicle and the upside amount is then discharged in your bankruptcy. See www.722redemption.com for information on this.

    LEGAL DISCLAIMER
    Mr. Larkin is licensed to practice law in CA. His response here does not constitute legal advice and does not create an attorney/ client relationship. The response is in the form of legal education and is intended to provide general information about the matter in question. Many times the questioner may leave out details which would make the reply unsuitable. Mr. Larkin strongly advises the questioner to confer with an attorney in their own state to acquire more information about the specifics of their case.

  2. Robert W. Kovacs Jr.

    Pro

    Contributor Level 14

    Answered . You will be able to file Amended Schedules and an Amended Plan with the Court to lower your payment. You will have to do another confirmation hearing with the judge in your case.

    If you filed Chapter 13 instead of Chapter 7 because your income was too high to file chapter 7 then you may now be able to convert your case to a Chapter 7 case and save yourself some more money.

    Also, you said that your bankruptcy fee was coming directly out of your paycheck? In Massachusetts, where I am licensed to practice, this would be an unethical and illegal practice.

    Here you would have to pay your lawyer in advance of filing or you would be able to put part or all of your fees in the chapter 13 plan. This would be part of the payment you make to the trustee and should not be coming out of your checking account directly.

    You should talk to your attorney about your options, converting to 7 or modifying your chapter13 plan. Also I would ask about the fee payment plan you are on.



    Best wishes,


    Robert Kovacs

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