What Happens In A Chapter 13 If I Get Sick Or Lose My Job And Can’t Afford To Make My Plan Payments?

24 Sep What Happens In A Chapter 13 If I Get Sick Or Lose My Job And Can’t Afford To Make My Plan Payments?

When you propose a Chapter 13 plan for three or five years, your intent is to comply with the terms of the plan.  Three or five years can be a long time, though, and often there are changes that you did not anticipate.  One of the benefits about Chapter 13 is its flexiblity which can often accommodate the changes that occur to you and around you.  Of course any changes that affect your ability to complete your plan should be discussed with your lawyer.  

·        If you are unable to work and can’t make your Plan payments you should fully discuss all of your options with your attorney.  If the situation is permanent, one option you have is to convert your case to a Chapter 7 in which case your debts would usually be discharged with no further payments required.  Of course, if you had past due mortgage or car payments in your Plan that had not yet been fully paid, your mortgage or car creditors could make a motion to have the automatic stay lifted and begin foreclosure proceedings on your home or repossess your automobile.  If that were to happen, any monies you still owe on the home foreclosure or vehicle repossession would be discharged in your Chapter 7 bankruptcy.  It is also possible to keep your vehicle after a conversion .  You can sometimes work out a new arrangement with the car lender, and reaffirm the debt.  Or you can redeem the vehicle, which is to pay off it’s value without regard to the amount owed.

·        If your situation is short term and you will be back to work in the near future, your attorney can contact your Trustee and try to work out a solution that would enable you to stay in your Chapter 13 bankruptcy.  Often the solution is to wait until the Trustee or a creditor make a motion to dismiss your case due to your non-payment, and then you can make a motion to modify the plan.  In the modification, you can excuse the payments you missed and start up again with a payment to the trustee over the remaining months of the plan.

·        If you lose your job and you had automatic Plan payments deducted from your wages, the payments to the trustee, of course, will stop.  Generally, your obligation is to begin making the payments to the trustee on your own, but you should be sure to contact your attorney immediately to fully discuss the situation with him/her.  If you get another job, notify your attorney so that a Wage  Order can be filed with your new employer.




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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.
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