One of the best things about filing for Chapter 13 bankruptcy is knowing you are taking control of your financial situation and making an effort to improve. Instead of struggling with the fear and frustration of never making ends meet, you’ll be able to meet your payment obligations and get a fresh start.
But what happens if mid-way through your Chapter 13 bankruptcy something changes and you’re no longer able to meet those obligations?
Life Goes on During Chapter 13 Bankruptcy
Chapter 13 bankruptcy repayment plans typically last three to five years. In an ideal world, your income circumstances would remain the same – or improve – and you’d be able to complete your plan without a problem.
Of course, as helpful as bankruptcy is, it doesn’t stop the world from turning and real life will continue to happen. Emergencies arise, living expenses change, and if you’re relying on income from a job to make your payments, loss of that job can derail the plan.
The bankruptcy court is well aware that three or more years is a long time and a lot can change. And while they aren’t what you’d call sympathetic to life changes, they do have systems in place to deal with unforeseen circumstances that affect Chapter 13 filers.
What are Your Options If You Can’t Fulfill Your Chapter 13 Obligations?
In general, the court has three options for dealing with your inability to meet your Chapter 13 repayment obligations.
The first is suspending your payment.
For this to happen, you’ll need to petition the court for suspension, and get your bankruptcy trustee to agree based on a valid reason. Suspensions are typically granted for a month or two. If you are working on a five year repayment plan, you’ll be able to extend your plan for no more than 60 months, so depending on the length of the suspension, an adjustment might be made to your monthly payments once they start up again.
The second option is to modify your monthly payments.
You’ll only be granted a modification if you can show a valid reason for needing one, and you’ll still need to be able to make payments on the modified plan. This is an option if your income is reduced or if you lose your job but have alternate sources of income. If you have no income, you’re better off exploring another option until your situation improves.
Finally, you might be able to convert your Chapter 13 bankruptcy to a Chapter 7.
This is the option most often used when a person has a life-changing experience in the midst of their Chapter 13 repayment plan, such as an accident that causes them to lose their ability to work. Converting to Chapter 7 means your unsecured debts are immediately discharged, so you’ll no longer be legally obligated to pay them.
To read more about the differences between Chapters 7 and 13 bankruptcies, visit Nolo.com.
It’s also possible, depending on your specific circumstances, to have your Chapter 13 case dismissed and file for bankruptcy again in the future. This is the least appealing option for most people because there are limits on the number of times you can file for bankruptcy and the more times you file the more it affects your credit.
If you’re struggling to meet your Chapter 13 repayment obligations or you have other questions about bankruptcy, we can help. Contact the Law Offices of Robert M. Geller at 813.254.5696 to schedule a free consultation.