Many Florida residents file for Chapter 13 bankruptcy in order to reorganize their debts and gain a fresh start financially. As part of the process, they are required to prepare a debt repayment plan for court approval. Once that plan is approved, modifying or changing it also requires court approval, which will only be given if there is a substantial or otherwise unanticipated change in circumstances that warrants it.
Recently, the Bankruptcy Court denied a couple’s motion to modify their plan. They wanted to change their plan in order to surrender an older model vehicle to the secured creditor who loaned them the money to purchase it. The vehicle was purchased just months before the filing of their Chapter 13 petition.
The vehicle was plagued with mechanical issues and would not even pass the inspection process in North Carolina, which is where the couple lives. Because of this, they are not able to use the car. Since the husband works at a car dealership, he obtained an estimate for the repair work, which would cost over $1,000 to fix. Therefore, the couple filed a motion with the court to modify their plan in order to surrender the vehicle.
The court determined that there was not a substantial or unanticipated change in their circumstances and denied the motion. Florida residents who are in the process of putting together a debt repayment plan might want to thoroughly review their circumstances before presenting it to the court for approval. Receiving a modification is not often an easy process, and it might not be worth the risk to prematurely file a plan without first being sure that it will be beneficial in the long run.
Source: Bloomberg BNA, “Ch. 13 Debtors Can’t Modify Plan to Surrender Clunker”, Daniel Gill and Jay Horowitz, May 11, 2016