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Why would a debtor seek modification of a Chapter 13 repayment plan?

In our last post, we mentioned that there are various reasons why a party might want to modify a repayment plan after it has been confirmed. Here we wanted to look a bit at some of the potential reasons such a modification would be sought. Under the Bankruptcy Code, there are actually several clearly defined reasons a party would be allowed to seek a modification, whether it is the debtor, a creditor, or the trustee in the case.

One reason for seeking a modification would be to increase or reduce the amount of payments on certain types of debts under the plan. Another would be to extend or reduce the time period over which the payments are made. Yet another would be to modify the amount of repayment a creditor is to receive under the plan to account for payments made outside the plan. The latter can happen, for instance, when the creditor takes account of its records and realizes after plan confirmation that the debt owed is actually less than what was initially reported. 

Debtors, naturally, will ordinarily be the party petitioning for a reduction in payment amount or duration, while creditors will ordinarily be the party petitioning for an increase or extension in payments or the time over which the payments are made. There may be cases, though, where a creditor voluntarily requests reduced or shortened payments under the plan.

Another potential basis under the Bankruptcy Code for modifying a plan is to reduce the amount paid under the plan by the amount the debtor spent to purchase health insurance for the debtor and any dependents. To take advantage of this provision of bankruptcy law, a debtor is required to provide supporting documentation, and the help of an experienced attorney is indispensable.

In our next post, we'll look at a recent court case dealing with repayment plan modification by a Chapter 13 trustee.  

Source: U.S. Bankruptcy Code, §1229, §1329

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