Chapter 13 - Reduction in income due to job loss

[Bkq]

We are considering a Chapter 13. What happens if you file - a payment plan is set up - and a year - or further out - your income drops - due to loss of employment? Can the plan be modified - to reflect loss of income? Or do you have to file Chapter 7? Also, when filing a Chapter 13, can the attorney include a statement in the filing papers which might address loss of income? Thanks!

[justbroke]

You immediately contact your attorney. Your attorney will work on whether a modified plan will still be feasible, or determine that you should convert to a Chapter 7.

Always IMMEDIATELY inform your attorney of any change in income or expenses.

As for a "statement", there is a location on Schedule I where you can indicate future events that may affect income. However, the event must actually occur for it to "matter" in the calculations.

I hope that helps.

[Bkq]

Thanks! Let me asked you one or two other things. If I notify my attorney that an income reduction has happened ...what happens next? Does he ask the trustee to reduce the payment plan? If so, can the trustee reject that? Thanks

[tigergem]

It is my understanding that the total Plan amount must be sufficient to allow payment of your secured and priority debt, plus the trustee's fee, and can be fully funded in 60 months or less, that is all that matters. If your plan covers those bases, then I don't know if the Trustee would object to a reduction or not, but I don't think so. It is possible that you would pay less per month over a longer period of time.

Yes, your attorney would submit an amended Schedule I and J and a Motion to Amend the Plan, with the new proposed Plan, and then it would go to the court and trustee for a look see. Beyond that, I am not sure if we would have a whole new confirmation hearing or what happens exactly. I haven't looked that far down the road.

Actually, you could help your attorney out and make things go faster by working on a draft of that Schedule I and J amendment before you meet with him/her.

I am thinking about testing this theory myself. If I have a temporary increase in income and pay a little more into the plan over a short stretch, I am going to try to have the number of months reduced after that, and possibly just a slightly lower amount per month. All of the puzzle pieces aren't in place yet, though, so for now it is "just a thought".

[Bkq]

fORMS 22C, SCHEDULE I AND SCHEDULE J

Thanks for your response. I have retained an attorney - and have not turned the questionaire in yet. I want to do my homework to thoroughly understand chapter 7 and chapter 13. In the meantime, i am putting together a notebook of documentation that is requested to be submitted - along with the questionaire to the attorney.

My question is this: Would it help the attorney to go ahead and fill out the form 22c, schedule i and schedule j - ahead of time. I have all of the information that i need to do this - before i submit the entire package. Thanks!

[tigergem]

Yes, I do think it would be helpful for you to go through and fill out those forms yourself to the best of your ability. The reason is twofold. It is really good to fully understand the information that your attorney is working with, since you are ultimately the one who has to swear to the accuracy of the content. And working through the forms will probably raise important questions for you that you will want to ask your attorney.

[Billssuck]

This exact thing happened to me; my husband lost his job 5 months after we filed and has since found a job making about $1,000 less per month. We just filed (and it got approved) to modify our plan to surrender our house because it is just too much a financial burden on us now with the lower income as well as the future. Anyway, we are still in a ch13 because of some non-exempt cars we own and the fees to convert to a ch7 from a ch13 was more than the remaining total amount of our ch13 payments.

Yes, fill out the B22C before you go to your attorney. That's what we did and it made it go much smoother and it was more accurate I believe had we not done one in advance.

Good luck to you!

[espo1357]

Does anyone know what would have if you are in the 13 to get the second mortage stripped, but then have to convert to a 7 because of job loss?

Does the second not get stripped if you go to a 7?

What if the second is already stripped and then you have to convert?

[momofthree]

Does anyone know what would have if you are in the 13 to get the second mortage stripped, but then have to convert to a 7 because of job loss?

Does the second not get stripped if you go to a 7?

What if the second is already stripped and then you have to convert?

The 2nd lien is not removed from your property until after you complete your payments and your ch.13 is discharged. If you convert to a 7, then the lien remains.

[espo1357]

The 2nd lien is not removed from your property until after you complete your payments and your ch.13 is discharged. If you convert to a 7, then the lien remains.

Thanks!

It makes sense to stay in the 13, if you want to keep the property then.

I have no idea what to do sometimes with this property. Its becoming like a jail sentence in some ways.

[ColoradoBell]

I was surprised by what my attorney said to me re payment plans when you know in advance there will be loss of income.
She said there is a graduated payment plan that you put in your plan proposal. For me, it means that I'd pay one or two months of a high payment and then the rest would be really low (based on my SS as my only income).

Since you know that there will probably be a loss of income down the road, ask your lawyer about graduated payments...might save you bucks from having to do a reconfirmation /modification of plan