Debtor Can’t Afford Chapter 13 Payment – What are His Options?

07 Apr Debtor Can’t Afford Chapter 13 Payment – What are His Options?

I received the following email from a couple who are currently in a Chapter 13, but have seen their income go down:

Last July, my wife and I filed Chapter 13 as we were barely over the median income for Washington State. I am now no longer getting the overtime I did up to the six months prior to filing and my wife no longer can work due to health issues.I don’t see how I can keep up this budget much longer. Is it possible that we move to have the Chapter 13 dismissed, wait 6 months and then refile Chapter 7? We have about $70k in unsecured and $7k in secured debt and my future 6 month income will be at the rate of $56k annually whereas for filing purposes it was about $70k annually.

My response is as follows:  generally, I am not a fan of voluntarily dismissing a Chapter 13. This is especially true if a creditor has previously filed a motion for relief from stay (section 109 would prevent you from refiling for 180 days).  Instead, I would speak to your counsel about possibly converting your case from Chapter 13 to Chapter 7.   Another possibility – recalculate your Chapter 13 to lower the payment.

Every bankruptcy filing district has different rules about converting and about how the means test would have to be calculated.  It may be that your lawyer would have to argue your case before the judge, but that’s what bankruptcy lawyers do.

If your lawyer is not familiar with converting 13’s to 7’s, then you need to find a lawyer who understands this process.

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Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including and an Atlanta bankruptcy blog, Please mention Bankruptcy Law Network when you call.
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