What Happens If I Don’t Make My Chapter 13 Payment?

No one plans on dramatic financial changes, but they happen. When changes do arise to an individual in Chapter 13 bankruptcy, they might be misled into believing there is no other option than sticking to their schedule of set monthly payments. But they might be surprised to find that Chapter 13 bankruptcy has a great deal of flexibility. Before we discuss options, it is important to note that payments are not something you want to ignore. You must make all of your Chapter 13 payments in full and on time because if you do happen to miss a payment, the trustee in charge of your case may drop or dismiss your case. Were that to happen, the court cannot protect your property from creditors. However, if you decide that you no longer want to make payments on your Chapter 13 bankruptcy, you do have options.

For starters, you can convert the Chapter 13 bankruptcy into Chapter 7. If they do convert the case, the debtor no longer has to make Chapter 13 payments. An example where this might be a good option is if a person filed for Chapter 13 for a very specific reason, such as trying to catch up on a car loan or home mortgage to prevent a loss from foreclosure. However, if the debtor still cannot keep up with payments in Chapter 13, it wouldn’t make sense to make payments any longer, and Chapter 7 would be a favorable alternative. If you are represented by an attorney already, however, you do not want to convert your case without first speaking with your attorney.

The second option, if you no longer want to make payments on your Chapter 13 bankruptcy, may be a voluntary dismissal. This is an option that is usually available to debtors at any time. If a person filed for Chapter 13 in an attempt to catch up with car or mortgage payments and is successful, they may no longer want to be in Chapter 13. In this option, debtors are no longer required to make monthly payments. However, if this is carried out before, they will not receive a discharge.

Another option is to amend the Chapter 13 plan. Options in amending the plan can be as simple as adjusting the payment schedule, reducing the monthly payments, or even extending the length of a plan. There are some limitations on these changes. For example, you cannot extend the length of the plan for more than five years from the time of your first payment. However, if you have a reduction in pay due to a decrease in income, the amount of your monthly payment can be changed. The process involves a motion to amend the plan to the Chapter 13 trustee and all involved creditors.

Unemployment, garnishments, and repossessions can happen to anyone. When bad things happen to good people, and you are filing for bankruptcy in NY, the bankruptcy attorneys at Doyaga and Schaefer are here to help. Stop the harassment, the worry, the financial stress. For a free same-day consultation, call 718-488-7500 or 516-656-7500, or visit our website at bigapplebankruptcy.com for more information.