When an individual files a Chapter 13 Bankruptcy, that person will normally make monthly payments toward his or her debts for a period of 36 to 60 months. At the end of the plan period the debtor will receive a discharge of debts, even though in most cases the plan payments cover less than 100% of the debts.
If the plan does not pay 100% of the debts, the amount the Chapter 13 debtor pays each month must include all his of her available income determined under tests provided for in the bankruptcy code. The tests are normally applied as of the date the individual files bankruptcy, and are then used to formulate a plan, which the court confirms, for the entire 36 or 60 month period.
If there is a substantial change of circumstances the court can grant a motion to modify the plan. A debtor frequently uses this provision to obtain a reduced payment, if his or her income drops, or if there are certain significant expense increases such as medical costs. Likewise a trustee or a creditor may bring a motion to increase the monthly payment based on a change of circumstances.
In what appears to be a break for debtors trying to save their homes a 2013 court case ruled that a mortgage modification, which reduced the debtors’ mortgage payment, could not be grounds to increase the Chapter 13 payment. The court said that while an increase of income will justify a modification of the plan, the law does not allow a modification based on a decrease of expenses.
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