So, you’ve filed Chapter 13 bankruptcy. You crafted a plan that covered every contingency, got all your creditors to agree to it, and the court confirmed it.
A year later (with two to four more years to go on your plan), you get the news: your household will be growing. You’re having a baby!
What does this mean for your Chapter 13 plan? As any parent can tell you, a new baby means more expenses. Formula, diapers, and new clothes every eight weeks isn’t cheap. It’s very possible that your payment plan won’t be able to withstand such a big hit to your finances.
Fortunately, the Bankruptcy Code allows you to modify your Chapter 13 plan. Section 1329 of the Code states:
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to—
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;(2) extend or reduce the time for such payments;(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan; or(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor (and for any dependent of the debtor if such dependent does not otherwise have health insurance coverage) if the debtor documents the cost of such insurance and demonstrates that—
(A) such expenses are reasonable and necessary;(B)
(i) if the debtor previously paid for health insurance, the amount is not materially larger than the cost the debtor previously paid or the cost necessary to maintain the lapsed policy; or(ii) if the debtor did not have health insurance, the amount is not materially larger than the reasonable cost that would be incurred by a debtor who purchases health insurance, who has similar income, expenses, age, and health status, and who lives in the same geographical location with the same number of dependents who do not otherwise have health insurance coverage; and