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Modification of Chapter 13 repayment plan, P.1

Previously, we looked at a recent bankruptcy case in which the court determined that a debtor’s personal injury settlement, which was obtained while his Chapter 13 repayment plan was still ongoing, was part of the bankruptcy estate and could therefore be worked into the debtor’s repayment plan. The court, in making the ruling, adopted a growing majority approach to determining whether property acquired by a Chapter 13 debtor after confirmation of a repayment plan is part of the bankruptcy estate.

The approach goes by the name “estate-replenishment,” which essentially means that the Chapter 13 estate, rather than being locked into the moment of confirmation, continues to exist over the life of the repayment plan and include property acquired by the debtor after confirmation. In this approach, it does not matter whether the property is necessary to complete the repayment plan as it was confirmed—it is still included. 

As we noted last time, federal bankruptcy law allows for the modification of Chapter 13 repayment plans after they have been confirmed. Modification may be requested not only by the debtor, but also by the trustee or by an ensured creditor. Federal law identifies various grounds for repayment plan modification:

  • To increase or decrease the amount of payments for certain types of claims
  • To extend or reduce the time for such payments
  • To change the amount of distribution to a creditor under the plan as necessary to account for payment of a claim outside the repayment plan
  • To reduce the amounts to be paid under the plan by amount spent on the purchase of health insurance for the debtor and any his or her dependents

In our next post, we’ll look at the importance of working with an experienced bankruptcy attorney when seeking modification of a Chapter 13 repayment plan.

Source: 11 U.S. Code § 1329 - Modification of plan after confirmation

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