A question that many clients ask relates to Chapter 13 bankruptcy. They want to know what occurs if their financial situation changes during the time allotted with their payment plan. Remember that a Chapter 13 payment plan extends from three to five years. A lot of changes can occur in your circumstance during that time. You or your spouse can become ill or be involved in an accident, or one of you could lose a job-which can mean either major additional expenses or a decrease in income.

The benefit of Chapter 13 bankruptcy is its flexibility. Often, the bankruptcy court can agree to adjust your payment plan to make it work for your new circumstances. This frequently means that your required monthly payments would be lowered.

In some instances, you may not be able to pay your mortgage even with the restructuring of your debt involved in your Chapter 13 bankruptcy case. This situation would require a modification in your payment plan. If it is a short-term difficulty that you are having, the bankruptcy court may permit a moratorium on payments if it allows you to recover from a temporary cash flow issue.

And finally, if your circumstances radically change, Chapter 13 includes a “hardship discharge.” This will be granted when your payment plan has been accepted but something has come up that prevents you from honoring the payment plan. A hardship discharge is only a viable option if: your inability to pay is a result of circumstances beyond your control; your creditors have gotten at least as much payment as they would have been given under a Chapter 7 bankruptcy; and altering the plan is not possible.
If you live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, or Golden, Colorado, and have any questions, please contact me. Kevin D. Heupel, Colorado Bankruptcy attorney, 303-955-7570, COBankruptcyHelp Email, free-consultation form.