So you’ve been making your monthly Chapter 13 payment and it hasn’t been easy. There isn’t a lot of wiggle room to begin with but some months have been better than others. Plus, you know you’re on track to save a lot of money by completing the Chapter 13 bankruptcy. Then life happens. It’s the loss of a job, unexpected medical situation or a variety of other reasons why you may not be able to afford your monthly Chapter 13 payment anymore. So what do you do?
After filing Chapter 13 bankruptcy, you should confirm with your attorney whether the monthly mortgage payment is to be paid by you or the Chapter 13 bankruptcy Trustee. Often the mortgage payment is included in your monthly Chapter 13 payment and disbursed to the mortgage company by the Chapter 13 Trustee. Regardless of how the monthly payments are made to the mortgage company, you are eligible to deduct interest paid on your loan if you itemize your deductions on your tax return, and the mortgage interest meets the requirements established by the Internal Revenue Service. The same holds true if the property insurance and taxes are escrowed in your mortgage payment or whether you pay them directly to your insurance agent and city and county tax collector. They should be eligible for deduction on your taxes.
The mortgage company should continue to send you the Form 1098 Mortgage Interest Statement which will list the mortgage interest, insurance premiums and real estate taxes paid to them for the tax year. This will only include taxes and insurance if they were escrowed in your monthly payment. If you do not receive Form 1098 by early February following the tax year, you should contact the mortgage company and request they send the form to you. The information on Form 1098 is the same information the mortgage company provides to the Internal Revenue Service regarding your loan.
Most Chapter 13 bankruptcy cases are set to last for 36 to 60 months (3 to 5 years). During those years, you may experience a change in circumstances that put you in a position where you need to request for your plan payment to be lowered. The purpose of this blog post is to discuss the necessary steps to having your Chapter 13 plan payment reduced. Be sure to read everything carefully and contact our office if you have any additional questions.
When Can I Request For My Plan Payment To Be Lowered?
Receiving paychecks that are just slightly lower than when you filed the bankruptcy (for example, $50 or $100 per month) is generally not sufficient enough to get the court to lower your Chapter 13 payments. The Court is looking for a substantial change in circumstances. This could be a job loss, reduction in hours, medical issues, etc. If your circumstances have changed to the point where your income will not be what it was when you filed, follow our steps to requesting a review and/or modification of your plan payment.
Five Steps To Requesting A Reduction In A Chapter 13 Plan Payment:
Step 1: Email our office with documentation of all household income from the last 60 days. Your email should also include a completed Schedules I and J (click the blue link to get the necessary documents) and an explanation of what has changed and why you need a reduction in your plan payment.
Step 2: Give us a few days to review the information provided. We will contact you after we have reviewed the information and will let you know what we think we could request for your plan payment to be. If you agree with the request, we will prepare a motion to file with the bankruptcy Court.
Step 3: After the motion is filed with the Court, a hearing date will be set. You need to plan to attend the hearing.
Step 4: Before the hearing, you will receive a packet of information from the Trustee’s office. They will be asking you to fill out a budget and submit your last 60 days of income. The budget you provide to them needs to match the one we sent to you that you agreed on prior to the motion being filed.
Step 5: We will attend the hearing with you and if all goes as planned, your request for your plan payment to be lowered will be approved.
A few FYIs:
Not everyone qualifies for a reduction in plan payment. Everyone’s circumstances are different. If you are in a Chapter 13 and your entire plan payment is going to house, car, taxes, and/or other secured or priority debts, then your plan payment cannot be lowered without you being willing to surrender some of your property. In other words, there may be certain debts that the Court has to be able to pay in your case if you want to keep everything.
If you have a temporary change in circumstances (for example, you will be out of work for four weeks due to medical procedures), contact the Trustee’s office in writing and let them know what is going on, and ask if there is any way to have the payments reduced or stopped for one month.