Court Finds that an 83% Increase in Post-Petition Income of Chapter 13 Debtor is a Substantial Change to Warrant Plan Modification

Court Finds that an 83% Increase in Post-Petition Income of Chapter 13 Debtor is a Substantial Change to Warrant Plan Modification

This matter came on to be heard upon the motion of the Debtor’s ex-wife  to modify the chapter 13 plan of the Debtor, pursuant to § 1329 of the Bankruptcy Code. The Debtor moved for a directed verdict in his favor.

In the couple’s divorce, the ex-wife obtained a judgment of over $200,000.  At the time of the petition, the Debtor reported gross monthly income of $7,500.00 ($90,000 annually) based solely on commissions from his employment as a mortgage loan originator. On Schedule I the Debtor noted his income varied and was a “best guess projection.” Because the Debtor reported below median income at the time of filing, his proposed chapter 13 plan provided for a 36 month applicable commitment period. 11 U.S.C. § 1325(b)(4).

Ex-wife filed a motion to dismiss and objection to confirmation of the Debtor’s proposed plan largely on the grounds that the Debtor failed to propose a plan which accounted for undisclosed but anticipated increases in monthly income. The Debtor responded by asserting that his plan should be confirmed because any increases in income could be dealt with in the future through plan modifications pursuant to § 1329. Ex-wife withdrew her motion to dismiss and objection to confirmation and the court confirmed the debtor’s chapter 13 plan. The plan required the Debtor provide periodic income information to ex-wife.

As part of the confirmed plan requirement that ex-wife be updated on the Debtor’s income, the Debtor provided her with copies of his federal and state tax returns showing annual income of $120,956.00 in 2015. The Debtor also provided ex-wife with payroll reports in 2016 showing gross monthly income of $13,093.33 (an increase from the gross monthly income of $7,500 at the time of the petition). Based on the increases depicted in the periodic financial reporting, on November 30, 2016, ex-wife filed a motion to modify plan pursuant to § 1329. The motion alleges the increase in the debtor’s income is a substantial and unanticipated change in financial circumstances warranting a modification to the confirmed chapter 13 plan. Specifically, ex-wife asserts the Debtor should be required to pay increased monthly payments into the bankruptcy estate, and that the applicable commitment period should be extended by 24 months.


Please note, in order to view NACBA Member Content, you must sign in and then visit NEWS. If you are not a NACBA member, you may Become a NACBA Member 

No Comments

Post a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.