During a Chapter 13 bankruptcy, the Court will enter a plan for the repayment of your debt, to which you have agreed and are required to make. If you fail to make those payments, the Court will ultimately dismiss your case. However, that does not need to happen if you take prompt action once you discover that you are no longer able to make payments as ordered by the Court. The thing to keep in mind is that, in most cases, your payment plan is not carved in stone.
The Court understands that unexpected events can happen in your life. For example, illness, job loss, the birth of another child, the need to replace a car and add a car payment, and other events can make it impossible for you to meet the plan requirements. As a result, there is a procedure whereby you can file a modified plan with the Court.
Some people file bankruptcy to give them additional time to pay certain debts that must be paid, such as taxes or mortgage arrearages. If this requires payment over the largest plan length which is five (5) years, then they may have few choices available if they can no longer afford the payment plan.
However, if it is just credit card debts, medical bills, or a loan, there are three (3) options available to the debtor.
1. Change the payment amount. You can file a modified income statement if your income decreased, a modified expense statement if expenses increased, or both. The consequential net income can be used to modify your monthly payment.
2. Increase the Term of the Payment Plan. If your payment plan is for less than five (5) years, you can increase the term of the payment plan thereby decreasing the monthly payment, which can be very helpful if there are certain debts that still must be paid.
3. Convert Over to a Chapter 7 Bankruptcy Plan. In most cases, if you do not have a balance on debt that is required to be paid, including but not necessarily limited to, certain taxes and student loans, you can just convert your case into a Chapter 7 bankruptcy plan and wipe out the remaining debt, moving on with life and getting a fresh start.
The ideal approach is to adhere to your Chapter 13 bankruptcy payment plan. However, if your circumstances change and you can no longer afford to make the payment plan as ordered by the Court, immediately contact your lawyer. Your attorney is in the best position to deal with the issue and still provide you with the relief that you need. Don't delay until it is too late to remedy the situation.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.