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Avoiding The Negative Impact Divorce Can Have On A Bankruptcy Case

Posted By admin || 8-Sep-2011

Avoiding The Negative Impact Divorce Can Have On A Bankruptcy CaseDivorce nearly cost a debtor the confirmation of his Chapter 13 bankruptcy case, after he failed to apply for a modification of his plan in a timely fashion.

Details of the bankruptcy case:

The Debtor and his estranged spouse, Mrs. Carlson, originally filed their joint Chapter 13 bankruptcy petition on December 28, 2005 ("Case No. 05-23252"). The plan was confirmed on October 6, 2006. The plan called for a payment period of 60 months with a total amount payments of "not less than $41,800.00." Class 7 non-priority unsecured creditors were to be paid pro rata from the sum of $34,100.00 or a distribution of approximately 88.4%.

The Debtor and Mrs. Carlson had marital problems and separated, bifurcating the case by the court's order entered on April 19, 2010. Mrs. Carlson's case was converted to a chapter 7 bankruptcy case; she received her discharge and that case was closed on October 6, 2010.

From December 23, 2009 and until August 13, 2010, neither the Debtor nor Mrs. Carlson made a plan payment in either bankruptcy case. The Debtor testified that this was due to the disarray of the parties' family life at that time and trying to determine what to do regarding the bankruptcy.

The debtor's failure to pay into the Chapter 13 bankruptcy plan he was left with nearly cost him the confirmation of the modified plan. A matter of fact the trustee rejected the modification a total of three times; but the bankruptcy court overruled his objections. One of the problems that this debtor made was failing to seek a modification of his plan as soon as the divorce happened or as soon as they couple began to experience marital difficulties.  The smart move would have been to request some type of forbearance of the Chapter 13 bankruptcy payments while they sorted out their divorce.

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