Some of my Chapter 13 Bankruptcy clients ask if after they file for Chapter 13 Bankruptcy, are they stuck with the plan payment even if their income is reduce?
The answer is generally no. Chapter 13 Bankruptcy plan payment is based on a formula involving nonexempt assets and disposable income after reasonable living expenses and unreimbursed work-related expenses.
Going back to the client’s question, if household income decrease but everything else stays the same, your bankruptcy attorney can file a Motion to Confirm Modified Chapter 13 Bankruptcy Plan and get your plan payment reduced. You may have other changes in your case and can still qualify for a plan payment reduction. It all depends on the facts of the case. You should call your bankruptcy attorney as soon as you have news that something will change so that your attorney, given the busy schedule, will have sufficient time to explore your options and put together your motion.
Another option is to convert your Chapter 13 Bankruptcy case to a Chapter 7 Bankruptcy case. However, if there is a reason that you are in a Chapter 13 Bankruptcy case in the first place, this option might be a terrible idea. For example, if you have nonexempt assets or too much assets to be protected under the California exemption, this means if your bankruptcy case is a Chapter 7 Bankruptcy case, the Bankruptcy Trustee will take away that asset. If your house has too much equity beyond what is protected by the California exemption, you risk losing your house to the Chapter 7 Bankruptcy Trustee who will liquidate your house and pay your creditor with the portion of the equity that is not protected by the exemption.
On the other side of the coin, if your household income increase more than your reasonable living expense and unreimbursed necessary work-related expenses, your Chapter 13 Bankruptcy Plan payment will increase. Make sure you inform your bankruptcy attorney of this immediately if this happens.
Your Chapter 13 Bankruptcy Plan payment will also increase if you acquire assets by for example, inheritance or lawsuit settlement. You must notify your bankruptcy attorney immediately if this happens too. Failure to do so will result in the dismissal of your Chapter 13 Bankruptcy case without a discharge and it might also result in penalties and sanctions by the Bankruptcy Court.
For more information, call Muoi Chea experienced Sacramento Bankruptcy Attorney. She has been successfully helping consumers and small businesses file for Chapter 7 and 13 Bankruptcy for over a decade. We welcome clients from all of Sacramento, San Joaquin, Solano, Stanislaus, Yolo, and possibly surrounding Counties: such as but not limited to Galt, Lodi, Stockton, Tracy, Modesto, Fairfield, Vacaville, DIxon, Roseville, Rocklin, Davis, Woodland, Elk Grove, Citrus Heights, Rancho Cordova, Galt, Yuba, Marysville, Vallejo, Benicia, California.