There is one very common concern among my clients that are preparing a chapter 13 bankruptcy plan of repayment: Is this written in stone?  Will I have to make this payment no matter what for the next three (or five) years?  The answer is, in most cases, no.

The courts understand that things happen in your life, such as illness, job loss, the birth of another child, the need to replace a car (and add a car payment), that can make it no longer possible for you to meet the current plan requirements.  That is why there is a procedure to file a modified plan.

Some people are in bankruptcy to give them time to address "must-pay" debts, such as taxes or a mortgage arrearage, over time.  If this requires a payment over the maximum plan length of five years, then they may have few choices available to them if they can no longer afford that payment.  However, if it is just old credit card debt, medical bills, or an unpaid loan, then there are options.

You Do Have Options

First, you can change the amount of the payment by filing a modified Schedule I if your income went down, and/or a modified Schedule J if expenses went up, like child care for that new baby.  The resultant disposable income can then be used to recalculate your monthly payment on a modified plan.

Second, if your plan is for less than five years, you can extend the term of the plan at the lower payment, which can be quite helpful if there are certain debts that you still must pay.

Third, what if there isn't any money left over?  What if you are now barely getting by?  In most cases, i.e. those where there is no remaining balance on a "must-pay" debt, you can simply convert your case to a chapter 7, wipe out your remaining debt (other than student loans and certain taxes), and move on with your life with a fresh start.

What Do I Do?

If you live in southern New Jersey and are thinking about filing bankruptcy, don't be concerned about being locked in to a payment plan for 3 to 5 years.  Many of my clients have successfully modified their plans down the road.  Call my office at 856-432-4113 or contact me through this site to schedule an appointment to discuss your options.

If you are looking for further information, download my book Top Questions People Ask About Filing Bankruptcy in New Jersey.

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Steven J. Richardson
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