Surprises in life are bound to happen, particularly over any 36-60 month period. That is why debtors are not always completely bound by their confirmed Chapter 13 repayment plan. The court understands that cars break down, air conditioning units stop working, medical expenses build up and debtors see their jobs reduced, or even eliminated, over any three-to-five year period.
11 USC 1329(a) permits the debtor to modify its confirmed plan “upon request.” Therefore, any debtor who is struggling with his/her payment and needs to reduce the monthly payment, can ask the court for a modification.
However, there are a couple caveats to this provision that all debtors need to be aware. This code section also allows a trustee and/or a holder of an allowed unsecured claim to make this same request. Therefore, a debtor who has experienced an increase in income since confirmation could be made to increase the monthly trustee payment.
More importantly however, this provision cannot be used by a debtor to override the fact that there are certain payments the debtor must make to complete the chapter 13 plan and receive a discharge. For instance, the debtor must pay off all child support arrears to complete a chapter 13. Therefore, if the debtor has experienced a loss in income, the debtor cannot get the modification approved if the modified plan does not contemplate for a complete repayment of the arrears over the life of the plan. This is true even if the debtor has a genuine inability to pay.
Let’s compare two scenarios, both of which where the debtor pays the trustee $700 per month and loses his job. In scenario one, the debtor has $50,000 in unsecured debt and is in a confirmed plan that pays it at 100%. In the second example, the debtor has $30,000 in unsecured debt that he pays at 0% and $30,000 in child support arrears that he pays at 100%. The first debtor can attempt to adjust the unsecured pool lower because he does not have to pay the unsecureds a certain percentage, whereas the second debtor must come up with enough money to pay off the arrears on the support obligation.
Therefore, while both debtors had the same trustee payment and maybe even made the same salary, the debtor in example one can get a modified plan confirmed, while the debtor in the second example cannot. Note that creditors could object to the debtors modification in example one, but most likely their objection would be defeated by the debtor if he can show a current inability to pay.
With offices conveniently located in Atlanta, Cumming, Dunwoody, Jonesboro, and Woodstock.