When The Chapter 13 Plan Has A Flat

Chapter 13 plans can be modfiedThe Chapter 13 completion rate for confirmed plans in San Jose is 65%.

Nationally, it’s about 35%.

So, how do we do it?

Lots has to do with the approach of our trustee, Devin Derham Burk and the on-going liaison between the bench and the bar.

But at bottom, it’s a skillful and cooperative bar of bankruptcy lawyers who recognize that the lawyer’s role does not end at confirmation.

Our Rights and Responsibilities statement makes it clear that we are the debtor’s lawyer throughout the case.

Which brings me to my point:  when our client has a flat, we need to get out our tools and change the tire.

Lots can happen in three years, much less five years.  Family, job, health.  The plan that was feasible at month one, is not feasible in month 27.

Change is inevitable ( and provided for)

Get your arms around section §1329-Modification of plan after confirmation

At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to—

(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments;
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan; or
(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)
The limitations on modifications are found in subsection b.  Note that compliance with the means test n 1325(b) is not a limitation on modification.

In harness together

The practical constraints involve getting your client to communicate with you when the car comes off the tracks.  If you can inculcate the idea that you and they are a team for the life of the plan, they are more likely to tell you before the motion to dismiss for non payment that there’s a problem.  Lay that groundwork at the beginning.
Don’t overlook the hardship discharge or conversion as useful alternatives to modification.
Image courtesy of USN and Wikimedia.