Extended Chapter 13 Plans Due to COVID-19: What You Need to Know
Extended Chapter 13 Plans Due to COVID-19
If you’re facing financial difficulties due to COVID-19, you may qualify for an extended Chapter 13 plan. The CARES Act allows individuals with confirmed Chapter 13 bankruptcy plans to extend the duration of their payment plans to up to seven years. This extension provides much-needed relief for those struggling with payments during the pandemic.
Key Benefits of the CARES Act for Chapter 13 Debtors
The CARES Act modifies the U.S. Bankruptcy Code, making it easier for debtors impacted by COVID-19 to manage their financial obligations. Specifically, payments received under federal pandemic-related laws are excluded from “current monthly income” calculations. This means such payments won’t affect the amount you’re required to pay into your Chapter 13 plan. Additionally, the Act excludes these payments from “disposable income,” meaning that you are not required to commit them to your bankruptcy plan.
How to Modify a Chapter 13 Plan for COVID-19 Hardship
The CARES Act enables debtors to modify their confirmed Chapter 13 plans if they experience a material financial hardship caused, directly or indirectly, by COVID-19. To modify your plan, you will need to request a modification from the court, citing the financial challenges brought on by the pandemic. Once approved, you can extend your payment period for up to seven years from the date your first payment was due.
While the term “material financial hardship” isn’t clearly defined, it is likely that courts will interpret this broadly to accommodate various COVID-19-related issues. If your hardship qualifies, this could be the solution to keep your Chapter 13 plan manageable during these uncertain times.
Creditors and Chapter 13 Modifications
From a creditor’s perspective, the CARES Act presents unique challenges. It’s anticipated that creditors will need to work closely with debtors and trustees to handle an influx of plan modifications. Chapter 13 creditors should expect requests for deferred payments on mortgages, auto loans, credit cards, and student loans. These deferrals are likely to be granted through modifications to existing plans.
That said, mortgage creditors should be aware of 11 U.S.C. § 1322(b)(2), which prevents modifying the rights of creditors secured only by real property, such as a debtor’s principal residence. However, 11 U.S.C. § 1322(c)(1) allows debtors to cure any defaults on their mortgages, even if modifications to ongoing payments are deferred.
What This Means for You
If you have a confirmed Chapter 13 plan and have encountered financial difficulties due to COVID-19, you may be eligible to modify your plan and extend the repayment period. This can give you the flexibility to defer some payments while keeping your plan intact. It’s important to work with our law firm to explore your options and take the necessary steps to request a plan modification.
Why Contact Our Law Firm?
Our team specializes in helping Chapter 13 debtors navigate complex bankruptcy modifications. We stay up to date on the latest legal developments, including changes brought on by the CARES Act, ensuring that you receive the best advice possible. Let us help you secure an extended Chapter 13 plan that suits your needs.
Take control of your financial future today. Contact our law firm for expert guidance on extending your Chapter 13 plan.
CLICK HERE to view the books authored by Attorney Ronald S. Cook
CLICK HERE to contact the Law Firm
