Modified plans, also sometimes referred to as mods, are a common term often heard in the context of a bankruptcy. Specifically, they are frequently referenced or invoked when discussing a Chapter 13 bankruptcy and the related Chapter 13 bankruptcy plan. Upon hearing the term you might ask, “What is a modified plan” and the related question, “What does a modified plan do?” At the most basic level, a modified plan is a Chapter 13 bankruptcy plan that has been altered in some way to better suit the needs of the person who filed it. A modified plan can be beneficial in a broad number of ways, and can be implemented for a wide variety of different reasons, but the basic purpose of a modified plan is to make the process of the Chapter 13 more feasible, to increase its probability of success, or to make it more impactful for the filer.
The most common reason that a Chapter 13 plan may be modified is to comply with a request made by the trustee (the government-appointed official responsible for overseeing the bankruptcy process). These requests are typically made some time between the occurrence of the First Meeting of Creditors (also referred to as a 341 hearing) and the confirmation hearing where a federal bankruptcy judge will sign off on the Chapter 13 plan, allowing it to be officially confirmed. These requests can occur for a variety of reasons, but they are most frequently made for the purpose of making minor adjustments that will render the plan ready for confirmation at the subsequent confirmation hearing.
Modifications can alter a broad array of different things in a bankruptcy plan, ranging from the size of payments to be made, to the size or destination of distributions that will take place using the proceeds paid into the plan, to the rejection, assumption or surrender of assets, agreements or loans that the person who filed the bankruptcy is party to.
A frequent form of modification would be to correct the amount of money being distributed to an individual creditor through the plan. If, for example, arrears on a home mortgage are being repaid through a Chapter 13 plan, the projected amount of the arrears at the time of filing may ultimately be different than the amount included in the proof of claim filed with the bankruptcy by the mortgage lender. In this instance, a simple solution to addressing this discrepancy would be to file a modified plan that increases the payments being made to the mortgage lender so that it matches the number included in the proof of claim that they have filed with the court.
Alternatively, a modified plan can also be filed after a plan has already been confirmed, either at the request of the trustee or through the initiative of the filer and their attorney. One example of a situation in which a post confirmation modification could be filed would be if the person who filed the bankruptcy suffered a temporary reduction in income, and a modification was necessary to alter the timing or size of payments so that the filer is able to successfully continue with the Chapter 13 plan. In speaking with your attorney during the process of the Chapter 13, and keeping them up to date with any major changes to your financial circumstances, they will be able to advise you on the merits and necessity of a possible modification, and ensure that your bankruptcy continues to work for your benefit.
Ultimately, modified plans exist to offer you flexibility during the process of a Chapter 13 bankruptcy. Whether this is to make minor alterations to prepare your plan for confirmation, change the size or timing of payments to help you stay up to date, or change the treatment of a specific claim after the date of filing, your attorney will be there for you to make sure that the modification process is leveraged to your advantage.
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