Unlike a Chapter 7 bankruptcy that wipes out all debts and provides a completely clean slate, a Chapter 13 bankruptcy reorganizes your debts into a program that is more manageable, usually by either extending the amount of time in which you can pay back your creditors, reducing the amount owed, or lowering the interest rates. Debtors who decide to file for bankruptcy don’t necessarily choose a Chapter 13 bankruptcy voluntarily: rather, their assets and income are measured against their debts in a means test. If the test determines that they have sufficient income available to pay, Chapter 13 is their only option. But what happens if you are provided a Chapter 13 bankruptcy and you miss a payment, or your circumstances change and you can no longer keep up with the plan? There are a few options available, and they all start with contacting your bankruptcy attorney as soon as possible.

If you miss a single payment in your Chapter 13 bankruptcy, your trustee may let it slide to see whether the missed payment is an anomaly, but after missing a second payment you run the risk that they will file a Motion to Dismiss, and by the time a third payment is missed that filing becomes a likelihood. This would eliminate your plan and put you back where you started.

If you think you can get caught up with a little more time, your bankruptcy attorney may be able to negotiate a repayment agreement that catches you up – but that means that you will need to make your existing payments as well as the payments on the new agreement. If you are unable to catch up on your payments on your existing plan, your attorney may be able to file for an amended plan, or an abatement of your payments if you have encountered a temporary situation that is impeding your ability to pay. If your income has dropped or your expenses have increased to the point that making payments is not possible, your Chapter 13 bankruptcy might be converted to Chapter 7, which would discharge your debts entirely.

If you do nothing in the face of missed payments, the trustee will definitely file a Motion to Dismiss. In that circumstance, you will be able to refile for Chapter 13 or for Chapter 7 as appropriate. The best way for you to manage your situation is to seek the guidance of a bankruptcy attorney. Contact us today to learn more.