Attorneys Expect the Unexpected In Chapter 13, Even When Clients Do Not

Chapter 13 is occasionally thought of as a “working man’s” or “wage-earner’s” bankruptcy plan, because one of the requirements for the individual filing is that he or she has steady income. Earlier this week, I talked about how one of the advantages of a Chapter 13 plan is that it allows the debtor to retain many assets, but what happens to the plan if the individual who filed suddenly loses his or her job or suffers some other reduction in income?

The good news is that the idea of Chapter 13 bankruptcy is to allow you to repay your debts based upon your disposable income. There is flexibility in the law that allows for modifications to repayment plans should an event such as a job loss, wage cut or catastrophic injury affect your disposable income. However, as I mentioned on Monday, the person you will need to contact immediately after learning of an event that will affect your ability to make a regular payment is your lawyer, not your trustee.

Some of the options that might be available to you in these cases include:

  • Ask the court to temporarily suspend your payments while you attempt to find a new job or increase your income
  • Amend your plan to extend the duration to 60 months, giving you more time to pay the required amount and lowering the monthly payment
  • Consider surrendering assets
  • Seek a hardship discharge
  • Possible conversion to Chapter 7 bankruptcy
  • Have your case dismissed and refile when your finances improve

Just as unexpected turns in life are often the reasons that force many Americans into bankruptcy, more unexpected turns can occur while someone is in bankruptcy. This is precisely why working with a Maryland or Washington DC bankruptcy lawyer during your process is so important, as the sooner that your attorney knows about any issues, the more he or she will be able to do for you in order to ensure a favorable outcome.

Law Firm of Kevin D. Judd – Washington DC bankruptcy attorney



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