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Court rules for debtors in plan modification case

In May, the U.S. Bankruptcy Court for the Western District of Arkansas found that the Bankruptcy Code permitted a Chapter 13 plan that had been approved to be modified. It also found that there was no need for a debtor to go through a significant change in circumstance to be eligible for a modification.

The couple were making payments of $605 to their bankruptcy trustee each month. Each time a payment was made, $320 was going to Arvest Bank to pay off a debt balance on a 2010 Chevy Equinox. The debtors wanted to reduce their plan payment to $260 from $605. This would partially be done by surrendering the vehicle and converting the balance into an unsecured claim.

This would allow the debtors to pay off the car loan pro rata with other secured creditors. The court found that the plan was created in good faith and was reasonable. Arvest claimed that the change would not be in the interest of the debtors or the bankruptcy estate. However, the court found that the debtors would be able to make their payments and were not significantly changing their financial obligation under the plan.

In a Chapter 13 bankruptcy, people may be able to have some or all of their debts reorganized over a period of three or five years. During the repayment period, creditors may not take action to collect on the debt such as following through on a foreclosure or repossession. This chapter is designed for people who have a regular and reliable source of income, and an attorney can describe the other eligibility requirements.

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