In a Chapter 13 bankruptcy, Kentucky debtors typically get to keep their possessions while adhering to a repayment plan that lasts either three or five years. There are many options for how this might work, and in one case a couple decided to give up their vehicle when modifying their plan.
Chapter 13 bankruptcy provides debt relief while debtors reorganize their obligations. In some cases, a change of circumstances is required when requesting a modification. In an Arkansas case, the court said a change in a couple’s financial condition was not required when modifying a plan.
Under the couple’s plan, every month they paid $605 that a trustee distributed to creditors. Unsecured creditors received a pro rata amount of this money, which means every creditor got the same percentage of their claim. More than half of the $605 went to the bank that had provided a loan for the couple’s 2010 Chevrolet Equinox. The couple wished to surrender the Equinox while any debt still owed to the bank for the vehicle would become an unsecured debt and be paid pro rata. The couple’s monthly payment would be reduced to $260.
The bank objected to these modifications, but the court said the new plan was feasible and made in good faith. Additionally, the new plan did not significantly change the financial obligation that the couple owed.
While a modification was needed to surrender a vehicle in this case, this story gives those considering bankruptcy something to consider when creating a repayment plan. Chapter 13 does allow debtors to keep possessions, but some debtors may wish to give up some property in order to reduce the amount owed. People in this type of situation may want to meet with an attorney and explore their alternatives.