It is only natural to make sure that you adhere to the terms of your bankruptcy plan once it is in place. However, certain circumstances can arise that make your payment schedule difficult to meet. Fortunately, federal bankruptcy law allows you to modify your plan as long as you meet a few specific criteria.
Grounds that may support a post-confirmation change
A Chapter 13 plan modification is not something the court grants automatically. There typically needs to be a legitimate reason tied to a meaningful shift in your financial situation, such as:
- A significant and long-term decrease in income
- An increase in necessary living expenses
- A change in marital status that alters the household budget
- An unexpected financial obligation, like a major home or vehicle repair
It is also worth noting that the U.S. Bankruptcy Code permits a modification request from the debtor, the Chapter 13 trustee or even an unsecured creditor at any point after confirmation but before all plan payments are complete, provided that your changes do not exceed the 60-month legal limit.
Adjustments the court may and may not allow
Not every element of a Chapter 13 plan is subject to change. Federal law outlines specific categories of modification that includes:
- Increasing or decreasing the monthly payment amount to a particular class of creditors
- Extending or shortening the repayment timeline
- Adjusting distributions to account for payments a creditor received outside the plan
- Reducing plan payments to reflect out-of-pocket health insurance costs for the debtor or a dependent
On the other hand, certain obligations are off-limits. Priority debts, such as domestic support, must generally be paid in full unless the creditor agrees to different treatment.
Your modified plan must also satisfy the “best interests of creditors” requirement. That means unsecured creditors need to receive at least as much as they would have in a Chapter 7 liquidation.
Steps for navigating the modification process
Filing a modification in Utah follows the same general federal framework, but there are practical steps that matter at the local level.
You can begin with filing a motion to modify the confirmed plan with the bankruptcy court. That motion needs to explain the reasons for the requested change and include the proposed modified plan and a summary of the changes made.
Once you file your motion, the court requires that the trustee and all affected creditors receive at least 21 to 28 days of notice (depending on the specific motion) before the objection deadline. This gives every party a fair opportunity to review the proposed changes and raise concerns if needed.
If there are no objections, the court may approve your petition without holding a hearing. If a creditor or the trustee does object, the judge will schedule a hearing so the court can discuss the competing interests and make a decision.