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What Happens If I Don’t Make My Chapter 13 Payment?

No one plans on dramatic financial changes, but they happen. When changes do arise to an individual in Chapter 13 bankruptcy, they might be misled into believing there is no other option than sticking to their schedule of set monthly payments. But they might be surprised to find that Chapter 13 bankruptcy has a great deal of flexibility.

Before we discuss options, it is important to note that payments are not something you want to ignore. You must make all of your Chapter 13 payments in full and on time because if you do happen to miss a payment, the trustee may drop or dismiss your case. Were that to happen, the court cannot protect your property from creditors. However, if you decide that you no longer want to make payments on your Chapter 13 bankruptcy, you do have several options.

For starters, you can convert the Chapter 13 bankruptcy into Chapter 7. A debtor is eligible to make a conversion to Chapter 7 at any time by simply filling out a ‘Request for Conversion’ form at the Clerk’s office or with his attorney. After that takes place, the debtor no longer has to make Chapter 13 payments. An example where this might be a good option is if a person filed for Chapter 13 for a very specific reason such as trying to catch up on car loan or home mortgage to prevent a loss from foreclosure. However, if the debtor still cannot keep up with payments in Chapter 13, it wouldn’t make sense to make payments any longer, and Chapter 7 would be a favorable alternative.  Note that if you began your case as a Chapter 7 and have already converted to Chapter 13, the process to convert back may be different.

The second option, if you no longer want to make payments on your Chapter 13 bankruptcy, is a voluntary dismissal. This option is open to Chapter 13 debtors at any time, as long as they did not previously convert their case from Chapter 7. If a person filed for Chapter 13 in an attempt to catch up with car or mortgage payments and he is able to catch up without the bankruptcy plan, he may no longer want to be in Chapter 13. By opting for voluntary dismissal, debtors are no longer required to make monthly payments. However, if this option is chosen, the debtor will not receive a discharge.

Another option is to amend the Chapter 13 plan. Options for amending the plan can be as simple as adjusting the payment schedule, reducing the monthly payments, or even extending the length of a plan. There are some limitations on these changes, for example you cannot extend the length of the plan for more than five years from the time of your first payment. However, if you suffer from a decrease in income, the amount of your monthly payment can sometimes be changed. The process involves a motion to amend the plan to the Chapter 13 trustee and all involved creditors.

If you have questions about Chapter 13 or want to find out how to get rid of your debt for good, why not call a firm that focuses exclusively on Chapter 7 and Chapter 13 bankruptcies. Kirkpatrick and Associates is the nation’s leading bankruptcy law firm and can put an end to the hassle of collection calls, help you keep your home and protect your credit score. For information on how to file for bankruptcy in Louisiana, call Kirkpatrick and Associates at 504-702-1575 for a free same-day consultation.