When A Bankruptcy Repayment Plan Is Not Affordable

How Is a Chapter 13 Payment Plan Determined?

When a Chapter 13 repayment plan is created, the amount owed monthly is determined by a person’s income at the time of plan approval, and the amount of debts that need to be repaid. These repayment plans are good for three to five years.

However, a lot can happen during that time. People can encounter a financial emergency or lose their source of income, making them unable to continue with their payment plan. 

So what do you do when the repayment plan is no longer affordable? 

What Happens If You Miss a Payment?

If an individual on a Chapter 13 repayment plan has to take a pay cut or suffers a medical issue, among other things, that prevents him or her from working, keeping up with the court-ordered payments can be difficult.

If one misses a payment, the court may dismiss the bankruptcy completely, allowing creditors the right to restart their attempts to collect, which can include foreclosing on your home, repossessing your car or garnishing your wages

Your Options If You Cannot Make Your Ch 13 Payments

Before missing a payment, Kentucky residents who have experienced a change in income level and are no longer able to meet the terms of their bankruptcy repayment plans may have a few options in order to keep their cases active.

  • Partial payments: It may be possible to arrange partial payments with the trustee.
  • Modify your plan: You can request a modification to the repayment plan with the court citing changed financial circumstances (such as job loss or pay cut).
  • Request early discharge: You may be able to ask that the court wipe out your debts through an early discharge due to hardships.
  • Convert to Chapter 7: If you qualify for Chapter 7, you can consider converting your case to a Chapter 7 with the guidance of an attorney.
  • Refile Chapter 13: If your case was dismissed, you can wait until your financial situation improves and re-file your case after you meet the required waiting period.  

An experienced attorney will have the ability to review the details of one’s new financial situation and thoroughly explain all of one’s available options.

Discuss Your Situation with an Attorney

If you are currently on a payment plan and are unable to continue making your payments, contact our attorneys at Musselwhite, Meinhart & Staples for help. We can evaluate your situation and help guide you towards a solution for your bankruptcy case. 

Request your free consultation today.