§ 69.3     Loss of Job or Income
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 69.3, at ¶ ____, LundinOnChapter13.com (last visited __________).

The debtor must have regular income to be eligible for Chapter 13.1 To accomplish confirmation, the debtor’s plan must be feasible2—there must be a source of income sufficiently regular and stable to make the payments required by the plan. When the debtor loses a job or other source of income prior to confirmation, counsel must scramble to salvage the case.


If the debtor has been properly instructed,3 the debtor will know to tell counsel about the lost job or income before the trustee or a creditor finds out and moves to dismiss. Loss of a job typically renders the debtor unable to make payments required by 11 U.S.C. § 1326.4 Counsel can move to postpone the commencement of payments under § 1326 while the debtor searches for new work.5 An affidavit or other evidence of the debtor’s efforts to find a new job helps.


If the debtor’s reduction in income is long term—for example, if the debtor becomes disabled prior to confirmation—it will be necessary to file amended schedules and a preconfirmation modification of the plan. If the debtor is reduced to income from unemployment benefits, workers’ compensation or the like, the plan must be recalculated based on that more limited funding. Collateral may have to be surrendered to make the modified plan work. The debtor may have to sell property or move to a cheaper apartment. Don’t act too quickly to end the Chapter 13 case by conversion or dismissal just because a big drop in income has trashed the original plan. Chapter 13 may be exactly where the debtor needs to be during the transition to a downsized budget and lifestyle.


1  See discussion of regular income requirement beginning at § 11.1  What Is Regular Income?.


2  See § 198.1 [ Able to Make Payments and Comply with Plan ] § 111.1  Able to Make Payments and Comply with Plan.


3  See § 25.1 [ Explaining Chapter 13 to a Debtor ] § 27.1  Explaining Chapter 13 to a Debtor.


4  See § 43.4  What to Do If Debtor Is Not Able to Attend in Person and § 44.1  First Test of Debtor’s Good Intentions.


5  See § 43.2 [ Timing and Form of Payment ] § 44.2  Timing and Form of Payment.