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Court rejects argument of debtors who changed Ch. 13 plan

Kentucky residents who have filed for Chapter 13 bankruptcy might finish paying off their plan earlier than expected. However, one bankruptcy court ruled that debtors in a similar situation were not permitted to make modifications to their model plan.

In that case, under the terms of the modifications they made, the debtors would have been authorized to avoid having to pay any unsecured claims. They said that they were not required to adhere to a minimum plan length since their creditors and the trustees did not object to a shorter plan. However, the U.S. Bankruptcy Court for the Northern District of California said that if a model plan was going to significantly change in length, that modification needed to be made through the bankruptcy court system. According to the court, Bankruptcy Code Section 1329 deals with how these modifications should be made.

With a Chapter 13 plan, debtors propose a payment plan of three to five years in length. The debtors in this case would essentially have prevented the trustee from distribution of any excess funds.

Filing for Chapter 13 bankruptcy may be one way that a debtor can obtain debt relief while still keeping some of their assets. People who are struggling with debt but concerned about losing a home or other major assets might want to consult an attorney to determine what their options may be. Filing for Chapter 13 bankruptcy may stop foreclosure and end harassment from creditors. However, many people may hesitate to file for bankruptcy because they feel as though doing so is irresponsible. Divorce, job loss, illness and other unexpected life events can result in even the most financially responsible people struggling to keep up with bills.

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