A ruling made by the U.S. Bankruptcy Court for the Western District of Arkansas may have an impact on Ohio debtors. It held that a couple could modify their Chapter 13 plan by returning their vehicle to the lender and treating a deficiency as an unsecured claim. While bankruptcy law does permit changes to an existing plan, some observers believed that it took a major change in circumstances to allow one.

However, the court ruled that there was no such requirement imposed on others who have tried to modify a plan. It had already been established that making modifications to an approved plan was allowed by the Bankruptcy Code. Therefore, the court saw no reason why the debtors’ approved plan could not be changed whether or not a significant change of circumstance had occurred.

The couple in question was to pay $605 a month to trustees with $320 going to the maker of a car loan. However, the couple proposed to give back the vehicle and treat the remaining balance as an unsecured claim to be paid pro rata with other unsecured claims. While the auto lender claimed that the proposal was not in the best interest of creditors, the court found it to be feasible and proposed in good faith.

Filing for Chapter 13 bankruptcy may allow an individual to have some or all debts reorganized and repaid over three or five years. In addition to being able to reorganize debt, creditors are generally stayed from pursuing collection efforts like making phone calls or pressing on with a foreclosure or repossession. An attorney can outline the eligibility requirements for this particular chapter..