If you filed Chapter 13 bankruptcy to obtain relief from overwhelming debt, you agreed to make monthly payments and fulfill a payment plan through the bankruptcy court. In some cases, the bankruptcy petitioner may find that their situation changes after they agree to the Chapter 13 plan payments. What can you do if you can’t make your Chapter 13 plan payments?

Completing a Chapter 13 repayment plan is not easy. Falling behind on your Chapter 13 plan payments may mean the bankruptcy trustee or one of your creditors will ask the court to dismiss your bankruptcy case. However, you do have options that could help you save your bankruptcy and obtain the eventual discharge of debt.

The first option you have if you have fallen behind on your Chapter 13 plan payments is to get current. Temporary financial emergencies may cause bankruptcy debtors to miss plan payments, but most petitioners can catch up on their payments if they have enough time. If you are behind on your payments and you fear your bankruptcy may be dismissed, speak with your bankruptcy trustee. In most cases, you can reach an agreement to bring Chapter 13 plan payments current by a specific date.

If the financial emergency you are facing that resulted in your default is not temporary, you may be able to request the court reduce your Chapter 13 plan payment amount. For example, if you lose your job while during your Chapter 13 repayment plan, the court may grant a request to modify the amount you need to pay. When filing the motion, make sure to propose a new payment amount and offer evidence of your changed circumstances that make the original payment amount impossible. In some cases, the court will not have the ability to reduce your payment amount. For instance, if your plan payment is being applied to nondischargeable debts (i.e., certain tax debt or child support arrearages, etc.) When the full payment amount originally agreed on for the Chapter 13 repayment plan goes towards nondischargeable debt, a payment modification is not possible.

In some cases, changed circumstances may amount to a hardship that the court could recognize as cause to grant a discharge even though you haven’t completed the required plan payments. The bankruptcy court will consider your current financial situation and what is in the best interest of your creditors when deciding whether or not to grant a hardship discharge. It is very rare for the bankruptcy court to give a hardship discharge, and most filers who receive a hardship discharge won’t get any debt wiped out due to the different types of debt and how they are handled during a Chapter 13 bankruptcy.

If you are currently in a Chapter 13 repayment plan and you cannot make your monthly payment, you may be able to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy. Converting to Chapter 7 is different than receiving a hardship discharge because the Chapter 7 bankruptcy trustee will sell any nonexempt property to pay creditors. If you qualify for Chapter 7 bankruptcy, all qualifying debt is wiped out, but it does not get rid of priority debts or allow petitioners to catch up on past due mortgage payments.

If none of the above options work for you, you could allow the bankruptcy court to dismiss your case and refile a new Chapter 13 bankruptcy. Refiling may be the best option if you can’t afford your current Chapter 13 repayment plan payment, but Chapter 7 bankruptcy doesn’t suit your circumstances. After you recover a bit financially, you can file a new Chapter 13 bankruptcy. However, the automatic stay is not always issued for successive bankruptcy cases, so depending on when you file the new Chapter 13 bankruptcy, you may need to request that the court extend the automatic stay.

If you need to discuss filing bankruptcy, or if you can’t make your Chapter 13 repayment plan payments , please don’t hesitate to get in touch. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in Chattanooga with two. You are in good hands with Kenneth C. Rannick P.C.

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