What Can I Do If I Can’t Afford My Chapter 13 Payments?

by Peter Orville, Binghamton Bankruptcy Lawyer

May 30, 2011

You always have options if there are significant changes in your life during your Chapter 13. If you’ve been laid off, become sick, split up with your spouse or just can’t keep up with the rising price of gas, don’t give up hope. Your Chapter 13 is flexible…it can be modified to adjust to life’s curve balls.

Your bankruptcy attorney knows how and when to modify your Chapter 13 plan. Of course your lawyer can’t help you unless you let them know about your situation and your concerns.

If your changes are only temporary – say a temporary layoff – you can modify your plan to excuse the payments you have missed, begin making reduced payments and increase payments later, when you are back to work. You can often lower the percentage you are paying to unsecured creditors which will allow you to lower your payments. I will usually wait until the Chapter 13 Trustee sends a warning letter. By then, your temporary change may have become resolved and the motion to modify can reflect that.

If the changes are more permanent, one option you may have is to convert the case to a Chapter 7. In a Chapter 7 you would not need to make any more payments to a trustee and your debts would be discharged. There are many issues to consider before converting such as: Can the Chapter 7 Trustee go after any of your property? 

If you were not finished paying mortgage arrears or a car in your Chapter 13 plan you must discuss with your lawyer what will happen if you convert to a Chapter 7. If you were paying non-dischargeable taxes in your Chapter 13, the taxing authority will go back and charge you interest.

Fully discussing the changes in your financial life with your bankruptcy attorney is the best way to know what your options are, and to be sure that you are going down the best path.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

Last modified: May 30, 2011