It takes discipline and planning to live within your means and stick to a budget, and it’s easy to get off track, especially if you experience an unexpected setbacks such as a job change or health challenge. Sometimes no amount of planning will eliminate sudden or gradual debt. Even if you’re doing “OK,” you may see that your finances need to change before you find yourself in trouble. If you have the income to keep up with some of your debts, but are unable to make full payments each month, it may be wise to look into a Chapter 13 bankruptcy. This would reconfigure your debts based on your income, which reduces your monthly payments. You’ll make these lower payments over the course of 3-5 years, and at the end of that period, remaining unsecured debts will be discharged. Filing a Chapter 13 can also help eliminate or reduce your debt while protecting your property and assets.
We’ll propose a reasonable payment plan to the court trustee, but there’s no guarantee that a change in life circumstances don’t make these payments unmanageable later. If you’re unable to make your Chapter 13 payments, the court trustee could dismiss your case. At this time, your creditors could file for a relief from the automatic stay, which means you’ll need to get current on payments or face foreclosure or repossession.
Changing Your Mind
If you’re no longer able to keep up with your repayment plan, you have a few options. Using your current situation, we can conduct the means test to determine if you qualify for a Chapter 7 conversion. A Chapter 7 would end your repayment plan and discharge most types of debt. If you have secured loans on your car or home, there’s a chance you may need to surrender this property, but we may be able to use allowed exemptions to avoid this. Additionally, if these payments are truly beyond your budget, it may be best to get out of the payments.
Before making any financial decisions, it’s important to think things through; you may only convert your case once, so planning the timing is critical. In order to convert your case, we’ll notify the court by filing a Notice of Conversion or Motion to Convert. The fees to convert are rather low, and some filers receive a refund of past Chapter 13 payments that have not yet been sent to their creditors. When you file the Chapter 7, you may also include new debt that you’ve incurred since your Chapter 13. This process takes a matter of days, and then you’ll be free from your repayment plan.
No one takes on debt with the intention of not making payments, but life can throw some unexpected curveballs. In these cases, a Chapter 13 gives you the opportunity to make some of the payments while also getting relief from debt that has become too much for you. Even after making this choice, circumstances sometimes change again and a Chapter 7 becomes your best option. The US Bankruptcy Court has many plans available to help consumers with their debts, and I can help you get your finances in order through bankruptcy.