If you file for Chapter 13 bankruptcy, you will need to follow a fixed payment schedule for three to five years. In a perfect world, you stick to it and keep track of all your payments. However, sometimes this does not happen.
You could lose your job or face other financial hardship that will prevent you from making your payments on time. If you find yourself in this situation, you may wonder if you can defer your Chapter 13 bankruptcy payments.
Can I defer Chapter 13 bankruptcy payments?
You may be able to change or suspend Chapter 13 bankruptcy payments. It all depends on the details of your case. You will need to overcome the following obstacles before you completely miss a payment.
Do you pay your mortgage or car directly to the trustee?
Some bankruptcy districts allow you to combine your mortgage and auto payments into your Chapter 13 payment plan. This option leaves you with a large consolidated payment to make. If you’ve taken this route and miss a payment, you’re simultaneously missing a mortgage and / or car payment.
In this case, the trustee can file a motion to dismiss your Chapter 13 case and remove you from bankruptcy protection. You will need to oppose the trustee’s motion and make up for the late payment before the creditors start contacting you.
Can you afford the current payment?
Falling behind on a single payment might not be a big deal. If you miss a payment, do your best to make it up as soon as possible. You might want to make a partial payment if you can’t cover it completely.
If you’re defaulting on more than one payment, there’s probably a problem. The current payment may be too high for your current income and budget.
When to file a request for modification or suspension of payment?
If you can suspend or reduce your payment, you will need to determine when. You can be proactive and do it right away. This is called a motion to suspend or change payment for the Chapter 13 plan and will likely cost you a bit in attorney fees.
Although every bankruptcy trustee is different, some have a strict process for requesting the modification or suspension of payments. You will need to consult your bankruptcy attorney or trustee for more information on their specific guidelines.
Tips if you can’t make your payments
Consider these options if you are having trouble with your payments.
Request a release from subjection
Even if you do not make all of your plan payments, you may be eligible for hardship. If you ask, the court will review your situation and consider the best interests of your creditors. With a hardship release, your case will be finished before the three to five year repayment plan is complete.
Go to chapter 7
If you are unable to change your monthly payments and are not approved for hardship, it may be a good idea to move on to Chapter 7 bankruptcy. This is where your non-exempt property will be sold and all of your unsecured debt will be cleared. Keep in mind that you will need to pass the resource test to advance with Chapter 7.
Reject and reclassify your file
As a last resort, the court can dismiss your case and resubmit another Chapter 13 bankruptcy. You can go this route if you are unable to follow your Chapter 13 payment plan and you are not. a good candidate for chapter 7.
Can I lower the monthly payments?
If your income declines during your Chapter 13 bankruptcy and you can no longer make your monthly payments, you can ask the bankruptcy court to reduce them. In determining whether or not you deserve lower payments, the court may take several factors into account, including your expenses, debts, and non-exempt property you own.
Examine your situation before asking for lower payments. If the court finds that your expenses have decreased or your income has increased, they may increase your payments instead of reducing them.
The court may approve your claim if you have accepted a lower paying job or are self-employed and have lost clients or faced unforeseen business expenses. They can also reduce your payments if you suffer from a serious injury or disability or if you are forced to pay health insurance costs that your employer covered in the past.
Next steps
If you can’t make your Chapter 13 bankruptcy payments, talk to your bankruptcy lawyer or trustee to learn more about your options. They can help you identify potential problems and recommend the best way to deal with your case.
