People in Texas who file for Chapter 13 bankruptcy might not be aware that the Chapter 13 plan can be modified after confirmation of the plan, but before completion of the payments. This can be requested by the debtor, the trustee or the holder of an unsecured claim.
A modification can be requested to raise or lower the amount of payments on claims in a specific class that were part of the plan, or to extend or reduce the amount of time for these payments. The plan can be modified to change the amount to be distributed to a creditor so the plan can account for a payment of the claim other than under the plan. A modification can also be requested to reduce plan payments by the amount expended by the debtor to buy health insurance for the debtor and any dependents.
To qualify for the health insurance modification the expenses must be reasonable and necessary. The debtor must have paid for health insurance in the past and the amount must not be materially greater than what was paid before. If the debtor did not have health insurance, the amount cannot be materially greater than what the reasonable cost would be for a person with similar income, expenses and health status in the same geographical location with the same number of dependents. Upon request, the purchase of health insurance must be verified to any party in interest.
Those who believe that Chapter 13 bankruptcy is the right choice for them should discuss their situation with an experienced bankruptcy attorney to gain an understanding of the various issues that may arise.
Source: gpo.gov, “1329. Modification of plan after confirmation,” accessed on May 24, 2016