Reducing a Chapter 13 Payment Due to Divorce | Westgate Law

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Reducing a Chapter 13 Payment Due to Divorce

considering bankruptcy, southern california bankruptcy attorney, filing bankruptcy, file for bankruptcy, reducing a chapter 13 payment, chapter 13 bankruptcy plansWhen in the midst of a Chapter 13 bankruptcy plan, filing for a divorce will mean revisions that have to be accepted by the bankruptcy trustee. Since many Chapter 13 bankruptcy plans are very strict and leave very little “extra” cash, many feel as if they are left in an impossible situation. One or both of the parties want to leave the marriage, but they’re already in a strict repayment plan. In many cases, the repayment plan is based on parties being required to work full time (some up to 7 days a week) in order to make their agreed upon payments in a timely manner. Parties aren’t sure whether the Chapter 13 trustee will revise the plan in order to compensate for separate living expenses, spousal maintenance costs, etc. It seems as if the new development of an impending divorce could make all past efforts to get out of debt through the Chapter 13 bankruptcy pointless. In this instance, there are two options open to the parties involved in the bankruptcy and seeking divorce: reduce the Chapter 13 plan payment to accommodate two separate households or convert the bankruptcy to a Chapter 7. Today, we’ll discuss the first option more in depth.

Can You Reduce the Chapter 13 Plan Payment?

Doing so is typically a fairly straightforward process. Without going into the specifics of a certain case, a divorce resulting in two separate households (where there was one before) should leave the parties eligible for a lower Chapter 13 payment. In some bankruptcy cases, the Chapter 13 plan is based on what it being paid back. Eligibility for a lower payment will be more limited when paying back certain debts that are a fixed amount: delinquent mortgage payments, tax debt, unpaid child support, spousal maintenance arrearages, etc. These fixed amounts cannot usually be reduced, which could mean you are not able to decrease the payment.

The majority of Chapter 13 bankruptcy cases are paying back unsecured debt (i.e. credit cards or loans). When this is the case, the payment plan that was agreed on at the time of filing can be modified to reflect the current expenses that were forced to change due to divorce. Other major life changes can result in a similar decrease in the payment amount such as a major health issue that would require medical payments for hospitalization, doctor’s fees or treatment plans. These major life changes cause a huge jolt to the monthly budget, which acts as a legitimate reason to reduce the monthly payment to the Chapter 13 plan.

If you have questions about reducing your Chapter 13 plan payment please get in touch with the experienced southern California bankruptcy attorneys at Westgate Law so that we can help you determine if you may have a legitimate reason for a decrease.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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