With a slow and sluggish economy the past few years, many debtors who entered into Chapter 13 bankruptcy reorganization plans are finding that they are unable to make their monthly payments. If you miss your payments, the trustee could make a motion to dismiss your case. You would lose the protections given to you under the bankruptcy laws from creditors trying to collect debts against you. This means if you miss your mortgage payment, your lender could foreclose. If you miss your car loan payment, the car finance company could repossess your car.
The worst thing you can do is to ignore the situation and stop making your payments. As soon as you realize you are no longer going to be able to make your Chapter 13 monthly payments, you should consult with a bankruptcy attorney. The good news is you have options, but you need to act quickly before you get too far behind in your payments. Your bankruptcy attorney can sit down with you and come up with an alternative solution that works for you and your creditors.
Here are some options that may work for you:
Convert a Chapter 13 bankruptcy to Chapter 7 bankruptcy. If you don’t own substantial assets, you might want to think about converting your Chapter 13 bankruptcy to a Chapter 7 complete liquidation. If you have a mortgage on your home and want to keep it house, or you have a car loan, you can reaffirm those debts in a Chapter 7. There are also bankruptcy exemptions you can take advantage that may allow you to keep your home and some of your personal assets. The good thing about a Chapter 7 is that your unsecured debts get wiped out so you can start all over again without owning any credit card debts or medical bills.
Ask the court to voluntarily dismiss the bankruptcy. You could request that the court voluntarily dismiss your bankruptcy, but you would lose the protections afforded to you under bankruptcy such as an automatic stay against your creditors collecting debts against you. When the bankruptcy is dismissed, you are no longer obligated to your Chapter 13 payments any more, but your creditors could obtain judgments, liens and wage or bank garnishments against you.
Renegotiate with your creditors to amend your Plan. There is also the option of asking the bankruptcy court to amend your repayment plan and readjust your payments so they are more affordable for you. However you would not be able to extend the repayment plan beyond the 60 month (five year) statutory limit. If your income has been reduced, this might be the best option for you, providing your creditors and the bankruptcy trustee approve the adjustment and agree to renegotiate the payments with you. It never hurts to ask them, all they can say is “no.” Chances are your creditors will be agreeable under most circumstances because they would rather get paid some money than no money.
If you currently filed for bankruptcy protection under Chapter 13 and want to convert to a Chapter 7, or you need to file for bankruptcy protection, you should contact our office to discuss your bankruptcy options. Contact our office immediately.