What to do When You Cannot Make Payments on Your Chapter 13 Repayment Plan
Chapter 13 bankruptcy is a debt relief method that allows a debtor to repay all or a portion of his or debt over a period of three to five years. Typically, a person chooses to file a Chapter 13 instead of Chapter 7 because he or she has enough disposable income to make monthly payments and because he or she wants to keep the family home and other significant assets. However, three to five years is a long time, and during that time, a lot can happen. Job loss, a serious injury or illness, divorce, or the death of a loved one can all have a major impact on a person’s financial standing. If something does happen, the debtor may become unable to meet his or her financial obligation.
If you are in a position where you can no longer afford your Chapter 13 payments, you may be feeling frantic, overwhelmed, and worried that there are no other options. Do not panic, because there are options. Our Southeast Iowa bankruptcy lawyers here at Noyes Law Office, P.C., have helped countless individuals work through their debt problems, and we are prepared to help you. If you cannot manage your Chapter 13 debt payments, contact our team for additional options today.
Chapter 13 Debt Modification
If your financial situation is not so bad that you still have some room in your budget for monthly payments, you may ask the court to modify your current monthly payment to something a little more reasonable. In order to reduce your payment amount, you would need to show good cause, such as a drastic pay decrease, substantial medical bills that will take years to pay off, or job loss.
If your situation is so dire that you cannot afford payments at all at the moment, you may ask the court to suspend your payments for a few months. Again, you would need to show good cause. Bear in mind that if you do have payments suspended, the courts may only agree to a one to two-month suspension. If you have a five-year plan, and if the suspension would mean that your bankruptcy lasts for more than 60 months, you would not be eligible for suspended payments. If the court does agree to a suspension, you may have to repay the missed amount over the course of the remaining months. This option should only be considered if you do not plan on your hardship lasting for long.
Convert to a Chapter 7
If your situation is bad enough, and if you do not foresee it getting better any time soon, you may be able to convert it into a Chapter 7 in accordance with Bankruptcy Code. 11 U.S.C. § 1307(c). If this is your only viable option, you can have all of your unsecured debts discharged. However, this also means that you will not be able to keep your home and other assets that have remained unpaid. If you want to keep your home but wipe out all other debts, you may be able to reaffirm your debt, which means that you promise to repay a portion of a debt that has been discharged in a Chapter 7.
If all else fails, you may have to ask the bankruptcy court to discharge your case and try to file again in the future.
Always Consult With a Bankruptcy Lawyer First
If you are struggling to meet your monthly Chapter 13 repayment obligations, it may be time to consider other options. However, before you proceed with any options on your own, contact a Southeast Iowa bankruptcy lawyer about which option would be best for your situation and for advice on how to proceed. This may be your last shot at debt relief, and you do not want to miss it because you approached it in the wrong way. Let our attorneys here at Noyes Law Office, P.C., be your guide to financial freedom. Call our office today.