Household Size Changes Can Affect Chapter 13 Bankruptcy Plan

March 5th, 2009 by Reed Allmand

In a Chapter 13 Bankruptcy case overseen by Judge Manuel Barbosa, the bankruptcy court determined that if a debtor’s household size changed after filing for bankruptcy the length of their Chapter 13 bankruptcy plan could change accordingly. In this particular case a bankruptcy trustee opposed confirming a Chapter 13 bankruptcy plan because the plan’s length was only 40 months as apposed to 60 months. The bankruptcy trustee argued that since the debtors’ income exceeded the median income for a family of three the debtors should be required to remain in the Chapter 13 bankruptcy plan for the full 60 months. The debtors countered that they in fact had a household of four if they counted their 24-year-old daughter and if they counted a baby born postpetition their household was five persons.

The bankruptcy trustee argued that because they family did not claim the daughter on their tax return as a dependent that she did not count as a member of the household and that since the baby came after they filed for bankruptcy he/she could not be counted. Judge Barbosa ruled in favor of the debtors saying that because the census bureau defines a “household” as people sharing living quarters, the debtors did in fact have a household of at least four people. The bankruptcy judge also said that if the debtors’ household size changes after the Chapter 13 bankruptcy plan is confirmed they are required to report the changes to the bankruptcy court.

If you’re considering Chapter 13 bankruptcy, be aware that any changes in the size of your household can cause your plan to lengthen or shorten depending on whether the household size increases or decreases. So plan accordingly.