What Happens if I Miss a Chapter 13 Payment?
Chapter 13 bankruptcy is often referred to as reorganization bankruptcy – or a wage earner’s plan – and it tends to benefit those who have considerable debt but also earn a substantial income. Instead of discharging your debt outright, Chapter 13 restructures your debt into a repayment plan that allows you to address the matter with monthly payments that are affordable to you. If you miss a payment, however, it can jeopardize the bankruptcy arrangements you’ve made. If you have questions or concerns about bankruptcy, don’t wait to consult with an experienced Columbia, SC bankruptcy attorney.
The Goal of Chapter 13 Bankruptcy
The Supreme Court shares that the purpose of bankruptcy is to afford honest debtors a fresh financial start without the pressure of the debt that’s hanging over them. Chapter 13 bankruptcy applies to those who have a regular income coming in, and it is generally considered preferable to Chapter 7 because it allows debtors to propose manageable repayment plans that typically last from three to five years while protecting significant assets.
This process allows debtors to keep their valuable assets, such as their homes while making regular payments to their creditors through assigned trustees. Chapter 13 bankruptcy doesn’t discharge debt immediately but instead accomplishes discharge with the completion of the payment plan. As such, missing a payment can matter.
Your Unique Situation
If you miss a Chapter 13 bankruptcy payment, the consequences will be left to the discretion of the bankruptcy court. To begin, the trustee handling your payment plan may file a Motion to Dismiss for Material Default, which is a request to dismiss your Chapter 13 bankruptcy case altogether.
From here, the court will schedule a hearing – at which the presiding judge will consider your explanation for missing the payment or payments and will likely resolve the matter in one of the following ways:
- The court may simply dismiss your current Chapter 13 case, and while you can likely refile, you’ll need to start back from the beginning.
- The court may modify your Chapter 13 repayment plan, which could mean adjusting the monthly payments you’re required to make.
- Your Chapter 13 case could be converted to a Chapter 7 case, which means you’ll no longer have a repayment plan, but any nonexempt assets you own can be liquidated in order to pay your creditors.
Bankruptcy laws are extremely complex, and Chapter 13 bankruptcy is no exception. If you’ve missed a scheduled payment or fear that you might, reach out for the skilled legal guidance of a trusted bankruptcy lawyer.
It’s Time to Consult with an Experienced Columbia, SC, Bankruptcy Attorney
The compassionate Columbia bankruptcy lawyers at Reed Law Firm have reserves of experience helping clients move beyond their crushing debt with favorable bankruptcy terms, and we’re here for you, too. Chapter 13 bankruptcy can provide you with a new financial lease on life, so please don’t put off reaching out by contacting us online or calling us at 803-726-4888 for more information about what we can do to help you today.
