When we submit your Chapter 13 repayment plan, we are basing our numbers on your income and expenses as of the day you file. Obviously during the three to five years of your plan, things will change. You may have home or car repair expenses, a job change, unexpected medical expenses or post-petition tax debt such that you may not be able to afford your Chapter 13 plan payment.
We do have the flexibility in your Chapter 13 to amend your plan to reduce your payment to account for unexpected changes to your budget. We can file an amended plan, supported by documentation, to reduced your payment temporarily or permanently.
If you have a temporary job layoff, we can ask the trustee to suspend your plan payment obligations for a month or two. A suspension in your trustee payment obligation, however, will not prevent mortgage or car creditors from asking the judge to lift the bankruptcy stay.
What Happens to Your Chapter 13 Payment if Your Income Goes Up?
If you are fortunate enough to find yourself with increased household income, we are obligated to report that change to the bankruptcy court and to the trustee and to amend your plan to increase the payment. In these circumstances I look carefully at your budget to see if we have increased spending to offset the increased income.
If you receive a windfall, such as an inheritance or an unexpected substantial gift, we would also need to report that windfall to the trustee and adjust your plan accordingly. I would advise you, however, to let me know as early as you can if you anticipate a windfall so that we can determine if there are strategies that would benefit you.
Can You Buy a House or Car While in Chapter 13?
Yes, there are procedures in place whereby you can buy a house or a car while you are in Chapter 13. Understand, however, that we will need to obtain permission from the judge and approval from the Chapter 13 trustee before you can borrow money from a mortgage or vehicle lender.
Generally, the trustee will sign off on a mortgage payment in the $1,500 to $2,500 per month range or a vehicle payment in the $300 to $350 per month range. We will have to file an application for approval of outside loan and will need to supply documentation explaining why you need this loan and where any down payment is coming from. We will also need to document that you can afford the payment.
Chapter 13 Assumes Stability
While Chapter 13 does allow for amendments to decrease or increase your payments, or to obtain new loans, we will have to submit paperwork, wait for approval and perhaps appear before your judge. If you can avoid major changes to your Chapter 13 plan, you should. If you anticipate new expenses or changes in income, the sooner you can report these changes to me, the better.
Chapter 13 is sometimes called the “wage earner’s plan” because it assumes a steady income and steady expenses. This idea that anyone’s budget will stay the same for three, four or five years may seem outdated in 2017, but this is the system we have.
Over the past 25+ years Susan Blum and I have represented hundreds of Chapter 13 filers and we have filed many, many amendments changing the terms of our clients’ Chapter 13 plans.
Whether your case is relatively straightforward or if it is more complicated, we are ready to assist you in any way that we can.