If your financial situation has changed since your Chapter 13 bankruptcy repayment plan was confirmed, you may be wondering what will happen if you can no longer meet the requirements. Luckily, there are several options available to individuals who experience an income loss during Chapter 13 bankruptcy.
Waiting too long to take action can significantly limit the options available to you. If you cannot afford to make your Chapter 13 payments because of a decrease in income, contact the Cleveland bankruptcy lawyers at Luftman, Heck & Associates right away to discuss your options and learn how we can help protect your financial well-being during bankruptcy. Call us today at (216) 586-6600.
Overview of Chapter 13 Repayment Plans
Chapter 13 bankruptcy is designed for a person with a regular source of income, but who is behind on repaying debts. To qualify for Chapter 13 bankruptcy, debtors must have a regular income that is sufficient to support basic living expenses and Chapter 13 plan payments.
Filing for Chapter 13 bankruptcy is advantageous to individual debtors because it allows them to keep their property while making payments to creditors over time, usually three to five years. Once Chapter 13 bankruptcy proceedings are initiated, individual debtors must propose a repayment plan.
The repayment plan is based on your current monthly income, the amount of debts you owe, and the length of the plan. The repayment plan must provide for payments of fixed amounts on a consistent basis, and has to be approved by the court.
What are My Options If I Can No Longer Afford Chapter 13 Payments?
When you experience a loss of income during a Chapter 13 bankruptcy and can no longer afford to make payments, you do have a number of options. Those include:
- Request a Repayment Plan Modification – If your financial circumstances change, but you will still have some disposable income, you can petition the court to modify the repayment plan to reduce your payments. The court must approve the modification and you will be required to substantiate any changes in your financial circumstances.
- Convert Your Case to a Chapter 7 Bankruptcy – If you are unable to make payments because of a loss of income, you have the right to convert your case to a Chapter 7 bankruptcy provided you meet certain qualifications. You should consult with a bankruptcy attorney before making such a decision because there may be preferable alternatives.
- Suspension of Payments – If your inability to make payments is temporary, you can request that the court suspend payments for a brief period of time. In Ohio, this is referred to as a motion for a moratorium of plan payments.
- Extend the Length of Your Plan – If your plan is for less than 60 months, you could try extending the time period in which you have to make payments. Repayments plans cannot extend beyond 60 months.
- Request a Hardship Discharge – You can ask the court to grant a hardship discharge if you satisfy certain eligibility requirements. If granted, it would allow you to discharge certain unsecured, dischargeable, or non-priority debts even though you have not completed the repayment plan.
If you fail to take any action and stop making payments, your case will be dismissed. The trustee will typically pursue dismissal of a Chapter 13 bankruptcy case when you fall behind on multiple payments. If your case is dismissed, you will lose bankruptcy protections, meaning creditors may resume with their collection efforts. You will likely have the opportunity to refile, but you may have to wait 180 days before you are eligible to do so.
An Experienced Cleveland Bankruptcy Attorney Can Help
Deciding which of these options is best for your financial future can seem overwhelming and confusing. If you are struggling to make your Chapter 13 payments due to a loss of income or change in employment status, our Cleveland bankruptcy lawyers at Luftman, Heck & Associates can explain your options and help you determine the best course of action going forward.
Our attorneys have helped countless individuals successfully navigate the complex bankruptcy process and we approach each case with the dedication and sensitivity our clients deserve. Contact our experienced Ohio bankruptcy attorneys today at (216) 586-6600 to receive a free consultation about your case.