During a Chapter 13 bankruptcy, you don't fork over any property, but instead make a structured repayment plan. In an ideal world, you pay off your debts in three to five years, and that's that. But certain situations can make you fall behind in your repayment plan payments. Fortunately, there are a number of ways to accommodate such circumstances.
Here are three potential ways to modify your Chapter 13 bankruptcy plan:
- Unemployment. One of the most common reasons that a bankruptcy trustee will allow you to modify a Chapter 13 bankruptcy plan is the loss of income. If you lost your job and the income loss appears to be pretty long-term or permanent, the bankruptcy trustee may let you modify your bankruptcy plan.
- Unexpected medical emergency or expenses. Somewhat in connection to job loss is the loss of income due to a health crisis. Medical issues can affect your ability to afford your bankruptcy plan payments. If you've experienced an increase in your expenses which isn't new debt, your trustee might be able to modify your bankruptcy repayment plan. Expense increases that justify a modification can range anywhere from an increase in health care expenses to even the birth of a child.
- "Surprise" debt. If you have a new "surprise" debt that you didn't include in your original filing, then the bankruptcy trustee will allow the modification of the Chapter 13 bankruptcy plan to include that unaccounted for debt. If the debts included in the Chapter 13 bankruptcy are actually higher than your original estimates, then the bankruptcy trustee will allow the modification of the Chapter 13 bankruptcy plan to reflect the actual (higher) amount of the debts. Surprise debt isn't the nice kind of surprise like a birthday party, but it can be helpful for a bankruptcy modification.
If for some reason the bankruptcy trustee can't modify your repayment plan, you may still have other options. For example, you might be able to convert your case to a Chapter 7 liquidation bankruptcy or get your debts discharged based on an "undue hardship."