Can a chapter 13 be modified to split up the charges of spouses?

[sophieanne]

This is just something that I was discussing with another BK person and now I'm curious.

Scenario - A couple files chapter 13 and are in a 100% plan. One of the spouses quits their job and has no income coming in.
The debt being paid in the Chapter 13 is strictly unsecured credit cards and none of the cards are in both names...the accounts belong to one spouse or
the other but not both (no joint accounts, or authorized users). The only debt they have in common in their mortgage which has very little, if any equity.

Is it possible to modify the chapter 13 so that the one spouse who is working continues to pay 100% of their plan and the other spouse converts their part of the debt to chapter 7???
or is that even possible?

They are 3 years into their 5 year plan.

Thanks for any thoughts/info.

[LadyInTheRed]

I know that spouses can bifurcate their case in the event of divorce, but I have never heard of it being done in order for one spouse to convert to a Chap 7. It may still be difficult for the unemployed spouse to qualify for a Chap 7 if the other spouse contributes to his/her support. If this is more than hypothetical, the couple should talk to their attorney. I would be interested to learn the answer.

Why not just modify the plan to reduce the payment?

In a quick Google search, I found a case where the court allowed a bifurcation of a Chap 7 case so that the wife who became entitled to life insurance proceeds could convert to a Chap 13. http://www.casb.uscourts.gov/pdf/opinions/96-14109.pdf This is a pre-2005 case and there has been significant changes to bankruptcy law since then. I don't know if any of the changes would affect it. Also, it is a Southern California District Court case that does not set precedent that must be followed by other courts.

[sophieanne]

Thanks Lady In The Red..

My lawyer always encourages me to ask questions (even just FYI's)...so I may ask.

Why not modify? In the scenario, the one person would want to pay 100% of the debt back -- only so they can continue contributing to their retirement plan.

It's so intersting all the scenarios and questions that can come up over time

[catleg]

Sure I see no reason this couldn't be done if you aren't in a community property state.
Also what happens if you just modify the ch13 plan to reflect your current income?
There are a lot of interesting questions here, certainly the best solution is converting both to chapter 7.

[sophieanne]

Thanks catleg and Lady. I did ask my attorney about the scenario. In a community property state, the spouses cannot bifurcate the case unless they have separated, in which case each spouse would have to refile...it has to be both, not just one of them. So the best option is to modify the plan and the payment would be revised (lowered) to reflect the decrease in pay for the couple. The other option would be to have the case dismissed and then file again, but I don't see the point to that...it would be like starting from square one all over again and the payment amount would be the same as the modified amount..

[catleg]

I assume you are in a ch13 due to excessive income on the means test?
Have you recalculated how much income would be available to pay creditors in the plan?

[sophieanne]

yes..and it would be a signficant drop.masssive actually. Lots to think about.
Right now it's just in the thinking stage.