Yes. A debtor can file a motion at any point during the case to modify the terms of a confirmed Chapter 13 plan. As a little background, the debtor would have filed the chapter 13 plan when the case was filed. A plan contains many provisions including how much the monthly plan payment will be, the term of the plan, and most importantly how the debtor will deal with the various claims in the case. Provisions will be provided for secured creditors like mortgages and car loans, priority creditors like the Internal Revenue Service, and unsecured creditors like credit cards.
Sometimes during a chapter 13 case, a change in circumstances may compromise the debtor’s ability to make plan payments. A debtor may have lost a job or had a medical problem and need to reduce his or her plan payments. Most cases and plans are based on the debtors’ income at the time the case was filed, forecasted income post-petition and the debtor’s pre-petition income. Income levels can fluctuate over the life of a chapter 13 case. The chapter 13 plan lengths are 3-5 years so a lot can happen during that time period. Other issues that arise include having to sell the real property instead of keeping it or delays in the sale of real property. Some plans have a date by which real property will be sold. Sometimes, there are unforeseen circumstances which require a plan modification to extend the deadlines. A plan modification is the tool for all of these changes post-petition and post-confirmation.
The most common reason for modification is that a debtor just gets behind on the plan payments and cannot get caught up absent a modification. The debtor is usually facing the possible dismissal of the case. A modification motion must be filed and notice provided to all creditors with supporting evidence. A copy of the proposed modified chapter 13 plan must be provided along with reasons why the modification is warranted. After a certain notice time period has elapsed and if there are no objections, the bankruptcy court can approve the terms of a modified plan. A bankruptcy court order is required for a plan modification.
The reason to do a modification is to allow the debtor to stay in Chapter 13 and receive a discharge. A dismissal of a chapter 13 bankruptcy will result in no discharge being entered and the debtor will again be liable for all of the pre-petition debts.
Call David A. Arietta at (925) 472-8000 to go over questions about Chapter 13.