What if I can’t make the payments on my Chapter 13 plan?

 

Fallen behind on your Chapter 13 plan payment?

Chapter 13 plans generally last three to five years.  Lots can happen in that time

There may be a point when you can’t make the Chapter 13 payment.  You may have important, unexpected expenses;  lose a job; or become sick.

If you miss a payment, the court can dismiss your case if you don’t address the situation.

You have choices

Chapter 13 plans are voluntary and you can dismiss them freely.

If you have a temporary interruption in income or an unexpected increase in your expenses, you can ask the court to modify your plan.

The modification may reduce the payments or suspend the payments for a couple of months.  See how Chapter 13 works.

If you miss the payments and don’t take action to  modify or get a suspension, the court will dismiss your case.

Some Chapter 13 trustees allow a debtor to suspend payments on their plans when there is an interruption in income.

Alternatively, you may be able to modify the plan to lower the payments, for a while, or for the balance of the bankruptcy case.  It depends on what your plan provides for and which of the confirmation tests control your plan.

When case is dismissed

If your case is dismissed short of discharge, the fact that you filed before does not keep you from filing bankruptcy again.  Depending on how soon you refile, you may need to request an extension of the automatic stay.

You also have the right to convert your Chapter 13 case to Chapter 7.   If your income is permanently decreased to the point where you can’t resume payments, you may be eligible for a hardship discharge.

Your lawyer is your advocate

When you see that you’ll miss a plan payment, get in touch with your lawyer.  Discuss what’s happening in your financial life and explore which alternative works best for you.

Image courtesy of NoHoDamon

About the Author
 
 
Northern California bankruptcy lawyer Cathy is a 30+ year veteran of bankruptcy practice in the Silicon Valley. She is known for energetic representation of clients and her command of bankruptcy law.