I Can't Afford My Chapter 13 Payment: What Are My Options?

Chapter 13 is a type of bankruptcy that allows a debtor to make recurring payments for three to five years to resolve their qualifying debts. During the case, the debtor will thoughtfully develop a repayment plan with their attorney and the case trustee. Once the plan is approved, the debtor is expected to make their scheduled payments as agreed. Although the payment amount will remain the same, the debtor’s circumstances can change over the repayment period. A job loss or suddenly having to pay unexpected medical or other emergency expenses could impact their ability to remain current on their Chapter 13 payments. If you are a debtor in this situation, you may be thinking: I can’t afford my Chapter 13 payment. What are my options?

Often, the reason a debtor can’t make their payment is due to something beyond their control. These types of circumstances may make it difficult for the debtor to make their payment. The good news is that there are options for a debtor struggling with making their Chapter 13 repayment.

Contact a Bankruptcy Attorney

  • If you anticipate missing Chapter 13 payments, you should contact a bankruptcy attorney as soon as possible to discuss the situation. Your attorney can help you evaluate your situation, identify your options, and determine the next steps for your case.

Communication with the Court

  • You are obligated to make your Chapter 13 payments according to your court-approved plan. Missing payments could result in severe consequences for you and your bankruptcy case. If you can’t make your Chapter 13 payment, it’s essential to communicate with your attorney and the court. Your attorney can help you contact the trustee to discuss the situation. By being proactive, you can show the court that you are trying to work towards a solution.

Temporary Suspension

  • If you have experienced a temporary setback, you may be able to ask the bankruptcy court to suspend your Chapter 13 payments for a specific period. The bankruptcy court can consider the reason for the request and, if it finds it to be adequate, grant a temporary suspension. The suspension will not extend the payment term beyond five years, however. Additionally, you will still be obligated to make all required payments.

Modification

  • There can be circumstances that will permanently prevent a debtor from making payments according to the repayment plan’s terms. For instance, if the debtor was seriously injured and could not return to work, they may be able to modify their plan based on their changed circumstances.
  • The proposed modified plan must: 1) continue to address priority claims, 2) provide for regular payments on all secured debts, and 3) show that it is in the unsecured creditors’ best interest.
  • To establish that a modified plan is in the unsecured creditors’ best interest, the debtor will have to demonstrate that the creditors would receive at least the amount they would receive in a Chapter 7 bankruptcy case. The debtor must also show that the modified plan is manageable given their new circumstances.

Hardship Discharge

  • If your situation has changed so much that you cannot resume your Chapter 13 payments, you may qualify for a hardship discharge.
  • Under this result, your remaining unsecured debts would be discharged even though you did not successfully complete your Chapter 13 case.
  • You may qualify for a hardship discharge if the court finds that 1) you are unable to make their payments due to “circumstances for which [you] should not justly be held accountable,” 2) your creditors have already received as much as they would have under Chapter 7, and 3) modification is not practicable.

Converting to Chapter 7

  • You may have the option of converting your Chapter 13 bankruptcy to a Chapter 7 case. Under Chapter 7, the debtor can discharge their qualifying unsecured debts. You would still have to qualify for Chapter 7, and you may have to give up some of the assets you retained under Chapter 13.

If you are concerned about making your Chapter 13 repayment, you should contact an experienced bankruptcy attorney as soon as possible to discuss your options.

Contact the Law Office of Raffy Boulgourjian

Attorney Raffy Boulgourjian is a California bankruptcy attorney with over twenty years of experience representing clients and can help you with your Chapter 13 case. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California bankruptcy law needs.

 

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