What If I Can’t Make my Chapter 13 Payments? by St. Louis Bankruptcy Attorney Tobias Licker

In a Chapter 13 bankruptcy you pay all of your disposable income (after expenses) for the next three to five years to the chapter 13 trustee who will then pay your creditors according to your chapter 13 plan. If you don’t make your payments when they’re due, your bankruptcy trustee can ask the court to dismiss your Chapter 13 bankruptcy and you will be liable for the amount of debt that has not been paid through the chapter 13 plan. If you’re having a financial problem that interferes with your ability to pay your Chapter 13 payments, you can ask the court for help so that you can continue with your Chapter 13 bankruptcy.

 

One option is to let the case get dismissed and refile at a later time. However, it is in almost all situations better to keep the current case alive and to try to make arrangements to stay in the chapter 13 case. Instead of allowing your case to be dismissed, your St. Louis bankruptcy attorney can ask the court to consider one of the following options.

 

Request More Time

When the trustee asks the court to dismiss your Chapter 13 bankruptcy, your bankruptcy attorney should file a response to the trustee’s motion to dismiss. The trustee then, will set the motion to dismiss for hearing. You will have around 2 months between the filing of the motion to dismiss and the hearing. If you were able to catch up with your plan payments at the time of the hearing, the court will deny trustee’s motion or the trustee will withdraw his motion before the hearing. If you are not current at the time of the hearing but made new payments since the filing of the motion to dismiss, your bankruptcy attorney can request a continuance. If this is the first continuance and the first motion to dismiss, the court might grant a continuance to become current with your payments. The court is more likely to continue the motion to dismiss if you are less behind with your payment at the hearing date than you were at the time of the filing of the motion. If you have reasons why you were unable to make your plan payment and can show that the reasons were only temporary, the court most likely will continue. However, a continuance is never guaranteed, and if you want to make sure the case does not get dismissed, you might want to appear at the hearing and tell the judge the reasons for missing payments.

File a motion to amend your plan

If you lost your job, were diagnosed with a serious illness or otherwise suffered a financial crisis that will seriously impact your finances for a long period of time, you may be able to get your Chapter 13 bankruptcy plan modified. When you file a motion to amend your plan, the trustee might request current paystubs to verify the change in income. In addition to showing evidence of your new income, you’ll need a new budget detailing how much you can afford to pay towards your old debts. The court will evaluate your new financial documents and will modify your plan based on how much you can reasonably afford to pay. You must pay the new amount the court orders every month in order to avoid having your bankruptcy dismissed.

 

Request a Hardship Discharge

If you really can’t pay anything at all on your Chapter 13 bankruptcy anymore, you may be eligible for a hardship discharge. The court doesn’t automatically grant this type of discharge if you are unable to pay. Instead, you will have to show that converting to a chapter 7 will is not feasible, that creditors received in your chapter 13 as much as they would have received in a chapter 13 , and that you will not be able to continue to make payments for a reasons out of your control. If the court grants a hardship discharge, you will no longer be responsible for most of the debts included in your Chapter 13 plan. However, if you have certain priority debts, such as child support or alimony payments, you still have to pay them after the rest of your debts are discharged.

 

Convert your Bankruptcy to a Chapter 7

If your income has been slashed to a very low level and you don’t expect your circumstances to improve, you may want to consider converting your bankruptcy to a Chapter 7. Converting to a chapter 7 will require to update all schedules and statements. Your income on the means test will be still the income from when you filed the chapter 13 bankruptcy case. You don’t change the income information on Form 22A, the means test ever. However, if you were not able to file a chapter 7 at the time you filed the chapter 13 bankruptcy, and your income situation changed, your bankruptcy attorney will attach a statement to the B22A form explaining why the debtor is eligible to file chapter 7 even though a presumption of abuse arises. Before filing, your bankruptcy attorney will check prior filings to make sure you are eligible to convert to chapter 7 and that there is no unexempt equity the chapter 7 trustee could take. Once you convert to Chapter 7, most of your debts will be discharged, although you’ll still have to pay priority debts such as your child support payments or secured debt you want to keep such as car payments.

 

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