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Court rules against debtors’ bankruptcy modifications

On Behalf of | Oct 11, 2016 | Chapter 13 Bankruptcy |

Based on the ruling of one court, people in Ohio who file for Chapter 13 bankruptcy and then want to make modifications to the model plan must go through the legal system rather than taking it upon themselves to do so. This was the judgment of the U.S. Bankruptcy Court for the Northern District of California after five debtors attempted to make modifications themselves that prevented the trustee from distributing any excess funds.

The debtors’ argument was that the modification should be permitted since the trustees and the creditors did not object. Their modification would have allowed them to obtain a discharge once they had paid off the plan and would not require them to pay unsecured claims.

According to the bankruptcy court, the correct procedure in such a case is set out in Bankruptcy Code Section 1329. All Chapter 13 plans must run for a certain length of time, and modifying how long that period is can only be changed with a motion.

A person who is struggling with debt may feel overwhelmed. They might be concerned that filing for bankruptcy will leave them with nothing. In fact, a Chapter 13 bankruptcy filing allows a person to keep assets after working out a payment plan with creditors. An attorney may be able to advise as to what type of bankruptcy a person is eligible for or what their best option may be regarding debt relief. The lawyer may also be able to clarify any misconceptions the person might have about bankruptcy. For example, the person might think that their credit will not recover from a bankruptcy filing. However, an individual can actually begin working to repair their credit soon after a filing.


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