What will you do if you default on Chapter 13 bankruptcy plan payments?

It's not unusual for adverse changes to occur in a down economy. This is why it's common to face extreme situations leading to financial distress as a debtor. What you need is a flexible bankruptcy payment plan. This is provided by the Chapter 13 payment plan so that you can complete all payments on time.

Now the next question arises is what would happen in case you're unable to make payments? This might just result in the trustee moving to dismiss your bankruptcy case. Now why and when the trustee would move forward with the dismissal motion depends on specific jurisdictions, caseloads, trustee preferences as well as local practices and procedures.

Understand that once your bankruptcy case is dismissed, you'd lose the protection of automatic stay as well as being in bankruptcy with respect to the creditors. This is why there are several options available when you're unable to make bankruptcy payments.

You can convert your case

You've got the option of converting to a Chapter 7 case. This is beneficial for it ends the requirement of making any payments. If you're facing arrears for a car loan or a mortgage, then this should prove to be an ideal option.

You can amend your plan

You could also move to amend your Chapter 13 plan. A plan amendment helps you adjust the payment schedules, reduce your monthly payments, or even extend the length of the plan. If you're facing income reduction and require lower monthly plans, then this is the best option for you. All your creditors and the trustee should receive notice of the motion for leave to amend the plan.

You could seek a voluntary dismissal

If you're no longer interested in the Chapter 13 plan payments, then you can seek a voluntary dismissal of the case. This option is applicable at any point during the lifespan of your case. It might so happen that after filing bankruptcy you're able to catch up on the payments. In that case you wouldn't require to go on with the Chapter 13 payment plan any more. However, you wouldn't be able to obtain the benefits of the bankruptcy discharge any longer.

So you see, it's possible to help yourself in quite a few ways before going into arrears. The above plans can actually help you in more ways than one.

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