Johnson, et al. v. Fink Shows How Chapter 13 Bankruptcy in Chicago Could Be Beneficial

As our Chicago bankruptcy lawyers have discussed on our blog many times, Chapter 13 bankruptcy in Chicago has gained popularity in recent years.

This form of bankruptcy allows debtors to pay back a portion of what they owe over a three- to five-year period. It also protects their assets, such as a house or vehicles. Chapter 7 bankruptcy, the most popular form of bankruptcy, doesn't require payments, but assets are put at risk for liquidation.
Because many working-class Americans have found themselves battling debt due to the failing economy, job loss, rising medical costs and other factors, Chapter 13 has become a more attractive option. If they have valuables they want to keep, bankruptcy filers may be more inclined to attempt Chapter 13. Also, if they have a steady income, they may not qualify for Chapter 7.

A recent case out of Missouri, however, shows that while bankruptcy laws are designed to help consumers, there are strict rules that must be followed. And the complexity of the law requires the skills of an experienced lawyer who can help people through the process.

In Johnson v. Fink, a husband and wife filed for Chapter 13 bankruptcy protection in 2009. Based on Social Security income, as well as income from a pension and two jobs, the agreed amount to be paid was $1,890 per month for 60 months.

But about a year after they filed for bankruptcy, the husband lost his second job, which reduced how much he was bringing in to $1,240. After filing paperwork with the court that revealed they had $935 of disposable income, they asked for an amended plan reducing their payment to $100 per month.

But the trustee objected, arguing that the proposed plan didn't include all of their disposable income. The couple argued that based on other cases, their Social Security income shouldn't be considered when calculating their payment plan. The court ruled that the couple hadn't acted in "good faith" in proposing their plan. They asked for a delay in payments in order to appeal the decision, but the judge denied that motion.

They appealed anyway, but an appeals court sided with the bankruptcy judge. In its order, the court found that "when a confirmed plan is modified to reduce payments...due to a substantial change in financial circumstances, the modification must correlate to the change in circumstances."

The good news here is that bankruptcy judges will allow people to modify their payment plans under Chapter 13 bankruptcy. If they lose a job or have a major event happen in their lives, there is an avenue to reduce payments in order to make things manageable.

This is where a skilled lawyer comes in. A Chicago bankruptcy lawyer should be by your side every step of the way in order to help you get rid of the debt. If you are considering bankruptcy and aren't sure which chapter works for you, contact us today.

If you need to speak to a Chicago bankruptcy attorney, call DebtStoppers Bankruptcy Law Firm at 800-440-7235 today for a free debt analysis. Call 800-440-7235.

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