Filing Chapter13 bankruptcy may have seemed like a good idea a few years ago, but three years into a five year Chapter 13 bankruptcy plan and your financial situation may have drastically changed. So what do you do if you cannot pay your Chapter 13 bankruptcy payments? Can you save your bankruptcy or can you simply ask the court to dismiss your case?
Options for your Chapter 13 bankruptcy plan
The first consideration is whether or not you can eventually catch up on any payments which are in arrears. A temporary financial crisis is not unusual. In some cases, even if the court is threatening to dismiss your Chapter 13 bankruptcy plan, they may allow some type of catch up plan to help you avoid a bankruptcy dismissal.
Request a hardship bankruptcy discharge for your Chapter 13 bankruptcy plan
Another option, if you cannot catch up on your Chapter 13 bankruptcy plan and you have had a major life crisis, is to file a motion with the court and request a hardship discharge. Hardship discharges are only granted under very specific conditions and will only discharge nonpriority, unsecured, dischargeable debts. A hardship discharge does not discharge priority debts such as child support or certain tax debts.
Convert your Chapter 13 bankruptcy plan to a Chapter 7 Bankruptcy
A third option if you are not able to qualify for a hardship discharge or catch up on debt payments is to see if you can have your Chapter 13 bankruptcy case converted to a Chapter 7 bankruptcy.
For instance, if you had a high income paying job and your median income did not allow you to initially file Chapter 7 bankruptcy but now you have lost your job and can no longer make the Chapter 13 debt plan payments, you may be allowed to convert your Chapter 13 plan to a Chapter 7 plan.
Court modification of Chapter 13 bankruptcy plan
Another option to avoid a complete dismissal of your Chapter 13 bankruptcy plan is to ask the court for a modification of the plan payments. The court will expect you to provide information and proof that you can no longer make the plan payments (i.e. prove you have become temporarily disabled or lost your job).
Modifications before the plan has been confirmed may be relatively simple and may only require an amended plan to be filed. If the plan has been confirmed, however, you will have to file a motion with the court and have it approved.
Dismissing your Chapter 13 Bankruptcy plan
If there is no way to modify your existing plan, convert to a Chapter 7 bankruptcy, or to receive a hardship discharge, you may have to allow your case to get dismissed. Unfortunately, if your Chapter 13 bankruptcy case is dismissed your unsecured debts contained in your bankruptcy plan will not be discharged.
Prior to dismissal the court should send you a motion and notice of the dismissal. You will have time to challenge the dismissal by filing a written opposition to the motion and filing it with the court. Talk to a bankruptcy lawyer if you have questions about your options.
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