Amending Chapter 13 plans after payment period expires

Bankruptcy can help a Florida couple to regain financial stability after dealing with a serious crisis, but the approach to filing could have long-term implications. In addition to affecting one’s credit history, for example, some forms of bankruptcy could be reconsidered based on the filer’s change in financial status at a later date. Chapter 13 is often used by those who do not financially qualify for a Chapter 7 discharge. This format is also appropriate for those who want to keep possession of certain property.

Normally, Chapter 13 debt is discharged after a restructured payment period of up to five years. However, in June, an appeals court allowed for a revision of the payments owed by a debtor after this period expired. The bankruptcy case was filed by the couple in 2010. A copy of a 2012 tax return secured by the trustee in 2013 indicated that there was a significant increase in income, which led to an effort to increase the payments.

When the case was heard in bankruptcy court, the trustee’s request was denied. A district court concurred, but it was overturned by the U.S. Court of Appeals for the 7th Circuit. The court noted that the primary reason for a trustee to review tax returns would involve the potential for economic changes that would warrant adjustments to a payment plan. Further, the final decision occurring after the payment period’s expiration was not found to remove a responsibility on the debtor’s part to pay more.

Bankruptcy can seem confusing to a debtor, and issues such as divorce or other family changes occurring in the midst of a bankruptcy filing or repayment plan could complicate the matter. Legal assistance can be helpful throughout the entire process.