The Best Reason To Reduce Chapter 13 Payments

Chapter 13 debtors need health insurance

When life intervenes during the course of a Chapter 13 case, we can modify the debtor’s Chapter 13 plan.

As I laid out the provisions of §1329 on modifications for that post, I saw the hand of the late Senator Ted Kennedy in this section.

I talked earlier here about his role in providing a deduction on the means test for health and disability insurance that a debtor ought to have but might not have at filing.

Subsection 1329(a)(4) provides that obtaining health insurance not already deducted in the means test justifies a modification of a confirmed plan:

(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor (and for any dependent of the debtor if such dependent does not otherwise have health insurance coverage) if the debtor documents the cost of such insurance and demonstrates that—

(A) such expenses are reasonable and necessary;(B) (i) if the debtor previously paid for health insurance, the amount is not materially larger than the cost the debtor previously paid or the cost necessary to maintain the lapsed policy; or (ii) if the debtor did not have health insurance, the amount is not materially larger than the reasonable cost that would be incurred by a debtor who purchases health insurance, who has similar income, expenses, age, and health status, and who lives in the same geographical location with the same number of dependents who do not otherwise have health insurance coverage; and (C) the amount is not otherwise allowed for purposes of determining disposable income under section 1325 (b) of this title; and upon request of any party in interest, files proof that a health insurance policy was purchased.

One hopes that health insurance will become more widely available and less expensive over the next couple of years. But don’t overlook the opportunities for reducing plan payments in confirmed cases to fund health insurance for your clients who didn’t have insurance at confirmation.

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