Expert: Terry Leeders - 6/7/2008

Question
My husband and I live in Texas and filed for Ch. 13 bankruptcy in July 2005 to attempt to save our home. Our confirmed 5-year plan included our mortgage arrears and we had to make monthly mortgage payments. My husband lost several jobs in the first year of bankruptcy. Our attorney convinced the mortgage company to give us another chance, but my husband was unable to secure a permanent job and we eventually lost our house in June 2007. My husband continues to struggle with securing work. At this point, we have paid all of our secured creditors 100% and we have paid our unsecured creditors at least 10%. Since the mortgage is no longer in the plan, we owe a lot less. We only have unsecured creditors left and we have already paid them at least 10%. We talked to our attorney about our options. He said we could modify the plan, but that would cost $425. He said we could attempt to convert to Chapter 7, but that would cost $1300. I am considering just requesting a dismissal, but I am wondering if there is a chance that the trustee could "automatically" discharge our case at the 3-year mark (July 2008) since we have paid our unsecured at least 10%.

Answer
You must pay out your plan as it is confirmed, the trustee will not automatically discharge your case.  You would need to bring a motion to modify the plan, based on a negative change in circumstances, ie. less income, more expenses.  You can also convert the case and discharge the rest of the debt completely.  The fees sound like they are attorneys fees.  Talk with your lawyer to decide which option may be best.  If you dismiss the case, the other 90% will come due again, so that is not a wise option.