Sometimes it’s hard to predict where you will be in three to five years. But that’s how long it usually takes to complete a Chapter 13 repayment plan. Let’s look at what your plan is supposed to accomplish – and what will happen if you don’t complete it.
The Chapter 13 Repayment Plan
If you are eligible to file this type of bankruptcy, the goal is to get your debt to a manageable level and pay all or part of your debts over time. That’s what your plan is supposed to do. If you reach the end of your plan and have made all payments, some remaining debts are discharged. You just get on with your life. However, there are consequences if you fail to complete your Chapter 13 repayment plan.
An Unfinished Plan
There are several reasons you might not complete your plan. But before letting your plan lapse, consider what will happen if you do.
- Dismissal of Bankruptcy. The bankruptcy court will likely dismiss your bankruptcy. Sometimes this is done at the request of your creditors, who will know you have stopped making payments because they will stop receiving payments.
- The Automatic Stay Goes Away. When you filed your Chapter 13 petition, an automatic stay went into effect. This means your creditors, in most cases, have to stop asking you for payment. If you default on your Chapter 13 repayment plan and your bankruptcy is dismissed, the automatic stay is no longer in effect.
- Creditors Can Act. Since the bankruptcy is over and the automatic stay is gone, creditors can now go after you for payment of your debts. Debts covered in your Chapter 13 repayment plan didn’t go away because your plan was not completed.
We strongly encourage you to take steps to keep your plan in place instead of letting it lapse.
Avoiding a Default
If your Chapter 13 repayment plan no longer works, you might still be able to protect your bankruptcy from dismissal.
- Ask for Modification. You and your attorney can ask the court to modify your payments. Judges usually expect to see a good reason for your inability to complete your plan.
- Convert to a Chapter 7. This action can be complicated. Not everyone qualifies to file a Chapter 7 bankruptcy.
In some situations, you also can ask the court for a hardship discharge. Again, you have to prove your hardship and meet certain requirements before a judge grants your request.
Are You Having Trouble Making Payments on Your Chapter 13 Repayment Plan?
Attorney Leslie Craft has the experience you need to deal with bankruptcy. Ms. Craft’s goal is always to help her clients get past their legal problems and get on with their lives. Consultations are free and only take about 30 – 45 minutes of your time. Your options may surprise and even excite you!
To schedule a free personal consultation, call Craft Law Offices at (252) 752-0297 or email us at le************@***il.com. My offices are located in Greenville, Morehead City, and Rocky Mount for your convenience. I also represent clients in surrounding Eastern North Carolina communities, including Warrenton, Elizabeth City, Roanoke Rapids, Goldsboro, and Jacksonville.
Bankruptcy Doesn’t Have to Be a Painful Process.