What Happens if I Miss Payments in a Chapter 13 Repayment Plan?

 Posted on September 02, 2022 in Chapter 13 bankruptcy

While debtors have multiple options for addressing debts through bankruptcy, many people may choose a Chapter 13 bankruptcy, which will allow them to avoid the loss of certain types of property. In a Chapter 13 case, the debtor proposes a repayment plan to the bankruptcy court that details how they will repay some of their debts over a three- to five-year period. However, even though a repayment plan may make sense at the time a person files for bankruptcy, financial difficulties may arise in the future that can affect their ability to make ongoing payments. In these situations, debtors will need to understand what will happen if they fail to make the required payments.

Addressing Late or Missed Payments in a Chapter 13 Case

During a Chapter 13 bankruptcy, a debtor will be required to make all payments in their repayment plan on a monthly basis. If payments are late, or if the debtor misses one or more payments, the bankruptcy trustee may take action to address this issue. In some cases, the bankruptcy case may be dismissed. This means that the bankruptcy protection that the debtor was enjoying will be ended, and creditors may resume seeking collection of debts. In addition, if a foreclosure was halted by the bankruptcy, the mortgage lender may resume the foreclosure process.

Instead of dismissing a case, the bankruptcy trustee may choose to convert it to a Chapter 7 bankruptcy. While this may allow debts to be discharged, the debtor may be required to turn over any non-exempt property they own, which will be liquidated to repay creditors. If secured debts are discharged through Chapter 7, creditors may take action to repossess collateral or proceed with a home foreclosure.

Debtors who have encountered issues that may affect their ability to make payments toward a Chapter 13 repayment plan may have options. By contacting the bankruptcy trustee and discussing these issues ahead of time, arrangements may be made to avoid the dismissal of the case or a conversion to a Chapter 7 bankruptcy. The trustee may agree to defer one or more payments or temporarily suspend the repayment plan until the debtor is able to resume ongoing payments. In some cases, a repayment plan may be modified, and payments may be reduced, although priority debts such as domestic support obligations will still need to be paid in full. A debtor may also be able to request a hardship discharge that will eliminate certain types of debts without the requirement to complete their repayment plan.

Contact Our San Antonio Chapter 13 Bankruptcy Lawyer

If you are considering a Chapter 13 bankruptcy, it is important to understand what will happen if you miss payments on your repayment plan. At the Law Offices of Chance M. McGhee, we can help you understand your options and guide you through the bankruptcy process. If you encounter financial difficulties that affect your ability to make payments, we can help you determine the best ways to address this issue with the bankruptcy trustee. Contact our office today at 210-342-3400 to schedule a free consultation with our New Braunfels bankruptcy attorney.

Sources:

https://www.bankrate.com/personal-finance/debt/late-on-chapter-13-bankruptcy-payment-what-now/

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics