Law Offices of Nicholas Gebelt

What Happens If Circumstances Change During The Life Of My Chapter 13 Plan Such As Interruption Of Income Through Job Loss Or Illness Or Health Or Death? What Happens To My Payment Plan, And What Can Be Done, If Anything?


Options

There are several directions we can go if you experience an adverse change of circumstances during your payment plan.

A. Temporarily Suspend Plan Payments

If you cannot make any payments for a couple of months, we can file a motion to temporarily suspend plan payments. If the Judge grants the motion, you don’t have to make plan payments for that couple of months.

B. Modify The Plan To Reduce Plan Payments

If your income has permanently dropped, but you can make reduced plan payments, we can file a motion to modify the plan due to changed circumstances to reduce plan payments. Keep in mind that the revised plan still must satisfy the Chapter 7 liquidation requirement, the fairness requirement, and the feasibility requirement.

C. Obtain A Hardship Chapter 13 Discharge

If the change in circumstances has rendered you unable to make plan payments of any size, we can petition the Court to get a hardship discharge without completing the plan. You must satisfy a few requirements:

    • The Court must have already confirmed the plan;
    • You must have already paid your general unsecured creditors through the plan the amounts they would have received in a Chapter 7 liquidation;
    • The change in circumstances was not your fault;
    • It is not practicable to modify the plan.

Important limitation: In a hardship discharge, the list of nondischargeable debts is the same as the Chapter 7 list. Therefore, some of the debts you would have discharged in the original Chapter 13 might not be discharged in the hardship discharge.

D. Convert To Chapter 7

If you’re eligible for a Chapter 7, you can convert the case to Chapter 7. Once you do, you will you have a new meeting of creditors, and get a Chapter 7 Trustee. That Trustee will seize nonexempt assets, and liquidate them for the benefit of creditors. Therefore, if you have a house and the property value has gone up, it’s conceivable that the house could be in jeopardy.

E. Dismiss The Case

Finally, you can just ask the court to dismiss the case. However, that is usually a poor choice because not only do you not get the discharge, but all the interest that was held in abeyance during the pendency of the Chapter 13 case comes rolling over you like a Tsunami. Thus, if you had a lot of debt, you might end up in a position where you’re worse off after a dismissal than you were before filing the petition in the first place.

2. Why Do I Need An Attorney To Help With My Chapter 13 Bankruptcy Case? Can’t I Just Handle It On My Own?

Of course, you can handle bankruptcy on your own. However, it is wise to recall the old adage: “The man who is his own lawyer has a fool for his client.”

I remember reading about a fellow that did his own appendectomy. He got some books and performed an appendectomy on his own body. But was it really a wise move? I think most people who enjoy a modicum of sanity would answer in the negative.

In like fashion, due to the complexity of the chapter 13 case, it’s probably a good idea to get an attorney. Most Chapter 13 pro se cases are dismissed, and so the debtor has gone through the expense of filing chapter 13, going to the hearings, only to have the Judge dismiss the case.

Even in Chapter 7, it’s probably foolish to represent yourself, especially if you have any significant assets. I’ve occasionally been at meetings of creditors watching a pro se debtor have irreparable problems with real estate and the Chapter 7 trustee.

I’ve also seen people who were pro se debtors who had engaged in fraudulent transfers before filing and thought they were protecting the house. That was the absolute worst thing they could do. Since they’re now in Chapter 7, they’re not going to get the case dismissed, the house is on the chopping block, and they don’t even get to exempt the equity in the home because it’s not in their name anymore.

So yes, you can always do a bankruptcy by yourself without an attorney. I generally don’t advise it unless you are an attorney yourself, and you have a very clear picture of what’s going on in the bankruptcy case, and a good knowledge of the Bankruptcy Code because there are many traps for the unwary. If you don’t know what you’re doing, you can do yourself irreparable financial harm.

For more information on Chapter 13 Bankruptcy In California, an initial consultation is your best next step. Get the information and legal answers you are seeking by calling (562) 777-9159 today.

Attorney Nicholas Gebelt

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