What Will Happen If I Miss A Chapter 13 Plan Payment?
In the U.S., there are two main consumer bankruptcy options; Chapter 7 and Chapter 13 bankruptcy. Some small businesses may also qualify for a Chapter 13 if owned as a sole proprietorship.
Depending on the specifics of your case, Chapter 13 bankruptcy, which entails coming up with a repayment plan, might be the ideal option for you. If you are considering filing for Chapter 13 bankruptcy, also known as reorganization bankruptcy, one of the questions you may be asking yourself is, “What will happen if I miss a plan payment?”
After you file for Chapter 13 bankruptcy, you will likely be given three to five years to pay a portion of your debts. After that time elapses, any remaining balances will be discharged. But the truth is that completing a Chapter 13 repayment plan can be challenging. Sometimes, things happen that result in a person being unable to make payments. So, what will happen if you miss a Chapter 13 plan repayment? Find out below.
What Will Happen if You Miss a Chapter 13 Plan Payment?
Often, if you miss one Chapter 13 plan payment, it will not significantly impact the outcome of your bankruptcy case. Most trustees will forgive one missed payment and give you an opportunity to catch up on it. However, if you miss two or more payments, the bankruptcy trustee will most likely file a motion to dismiss. If the bankruptcy trustee files this motion, it could affect your ability to get a successful discharge of the remaining balances at the end of the process. If the bankruptcy trustee files a motion to dismiss, the court may dismiss your case. That said, it is crucial to note that bankruptcy trustees and bankruptcy districts handle missed payments differently.
If you know you will miss a Chapter 13 plan payment, it is crucial that you contact your bankruptcy attorney.
How Can You Fix Your Case if You Miss a Payment?
The following are some of the options available for debtors who miss their Chapter 13 plan payments. In the Middle District of Pennsylvania, you can propose a Stipulation to Cure your Plan Default with the Chapter 13 Trustee. This may require a wage attachment order for your employer to withhold your bankruptcy plan payments from your paychecks.
- Catch up on payments: This is one of the easiest solutions if you miss a Chapter 13 plan payment. However, catching up on payments may not be an option if the bankruptcy trustee has already filed a motion to dismiss.
- Temporarily suspend payments: If it is impossible to resolve the issues you are experiencing or catch up on payments, you can consider requesting not to make plan payments for some time. A skilled bankruptcy attorney can explain more about this option. It is best to pre-plan this with your attorney immediately after you miss your first plan payment in order file a Motion with the Bankruptcy Court to have a court order entered temporarily suspending your plan payments during an undue hardship.
- Amend your Confirmed Repayment plan. You may be able to file a Motion to Modify your confirmed repayment plan to address your missed plan payments, or also to include post-petition missed mortgage payment arrears if you fall behind on your monthly post-petition mortgage payments.
- Convert to Chapter 7 bankruptcy: If you lose your income or your expenses increase, you may have the option of converting to Chapter 7 bankruptcy. With this type of bankruptcy, the bankruptcy trustee may sell your nonexempt property and use that money to pay off your creditors. In a Chapter 7 bankruptcy, all your qualifying debt will be wiped out and discharged.
- Dismiss your case and refile after some time: Another option is dismissing your bankruptcy case and refiling. You can dismiss your case without prejudice (meaning you can refile bankruptcy again) and refile after your finances improve if all other solutions don’t work. You may need to file a motion to reinstate the automatic stay depending on the length of time between dismissing your case and refiling your new case.
Contact a Qualified Lehighton & Carbon County Bankruptcy Attorney
Contact our Lehighton & Carbon County bankruptcy attorneys at The Law Offices of Adam R. Weaver, Esq., for legal guidance.