Learn about the consequences of missing a Chapter 13 payment and how to avoid them.
Chapter 13 bankruptcy is a common form of personal bankruptcy that allows you to consolidate your debts into one reduced monthly payment for a period of 3 to 5 years. At the end of this period, the remaining balances on your debts will be discharged.
However, if you miss a payment during your Chapter 13 bankruptcy, you may face some very serious consequences:
Your bankruptcy may not be confirmed: It can take months for the court to actually confirm or approve your Chapter 13 bankruptcy plan. If you don’t keep up with your payments in the meantime, your bankruptcy filing may get rejected.
Creditors will be freed from the automatic stay: One of the benefits of filing for bankruptcy is that it stops your creditors from any further collection activities. This is called the automatic stay. However, if you miss a payment, your creditors may be allowed to resume collection activities such as foreclosures or repossessions.
Your bankruptcy may get dismissed: If you fall behind on your payments, you will be in violation of the requirements of your bankruptcy plan. The bankruptcy trustee overseeing the plan may ask the court to dismiss your case, in which case you will not secure the debt relief you need.
Options for Salvaging Your Bankruptcy After a Missed Payment
The good news is, missing one payment isn’t necessarily the end of your bankruptcy. Depending on the circumstances you may be able to salvage your bankruptcy by:
Curing your default: If you have missed a few payments because of an emergency, but are now back on budget, you may be able to avoid a dismissal by making back payments to catch up with your payment plan.
Modifying your repayment plan: If your income or expenses have changed since your Chapter 13 repayment plan was confirmed, it may be possible to ask the court to reduce your monthly payments to an amount you can afford.
Reinstating your bankruptcy: Even if your bankruptcy has been dismissed, you can attempt to get it reinstated. You will need to act quickly after the dismissal and get current with your payments for this option to succeed.
Converting to Chapter 7 or Requesting a hardship discharge: If your income and assets have declined dramatically, you can ask to have your bankruptcy converted to Chapter 7 or request a hardship discharge. Either way, you would be able to discharge your unsecured debts, but you would not get to discharge priority obligations, secured debts, student loans, and any other debts that cannot be discharged under chapter 7.
Need Help with Chapter 13 Bankruptcy?
If you have questions about filing for Chapter 13 bankruptcy or modifying your repayment plan, please contact the experienced bankruptcy attorneys at California Bankruptcy Relief at 951-755-1000.
