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Court rules Chapter 13 debtors cannot modify model plan

Based on the rulings of one bankruptcy court, Florida debtors who have filed for a Chapter 13 bankruptcy cannot make a change to their bankruptcy model plan without going through the formal modification process. The case, which was heard by a bankruptcy court in California, concerned five debtors who changed their model plans to permit them to get a discharge at any point after paying off the plan and getting confirmation. The change would have prevented the trustee from distributing any excess funds.

The argument of the debtors was that neither the trustees nor the creditors objected to the change. However, the bankruptcy court argued that Bankruptcy Code Section 1329 covered how such a plan should be modified and that a deviation from that was not permitted. It stated that any significant modification in the length of a plan had to be formally modified through the legal system.

Under Chapter 13 bankruptcy, debtors propoese a payment plan to repay some creditors in three to five years. The plan has to be approved.

Filing for bankruptcy may be one solution to debt relief, and people who are struggling with debt may want to discuss the pros and cons of bankruptcy with an attorney. It can mean a fresh financial start for people who are overwhelmed with bills due to divorce, a job loss, an illness or for any other reason. Some people might hesitate to explore bankruptcy as an option because they have heard some myths about the process. Filing for either Chapter 7 or Chapter 13 bankruptcy does not necessarily mean that people will have to give up all their assets. It also does not mean that their credit will be permanently damaged. A bankruptcy filing also ends harassment by creditors.

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