What Happens When I Fall Behind On Chapter 13 Payments?

Chapter 13 bankruptcy requires monthly, on-time payments.   But, what happens when you fall behind on Chapter 13 Payments?  Falling behind on Chapter 13 payments can result in several possible outcomes.    Let’s discuss what can happen when you fall behind on Chapter 13 payments.

What if I am behind on Chapter 13 bankruptcy payments

Falling Behind on Chapter 13 Payments? Your Case Can Be Dismissed

If you fall behind on Chapter 13 payments, your Chapter 13 may be dismissed.  If the court dismisses your case, then your Chapter 13 will be “over.”   You will be forced to look into other options.

The Chapter 13 trustee usually brings a motion to dismiss a Chapter 13 case when the payments are 2-3 months behind.   Once a trustee files a motion to dismiss, your attorney will have a chance to object to this motion.   During this objection process, you may be given the chance to make up your behind payments.   If you can make up your behind payments in time, the trustee will drop the motion to dismiss your case.

Falling Behind May Cause Your Case to Require a Motion to Modify your Chapter 13 Plan

Sometimes it may not be possible to come up to date on your Chapter 13 payments very quickly.  In such cases, it may be possible for your attorney to modify your Chapter 13 case.   Your attorney can change the terms of the plan by filing a motion to modify your Chapter 13.    Under the new Chapter 13 plan terms (if accepted by the court), you would then be back up-to-date on payments.

In some cases, it may not be possible to modify a Chapter 13 plan.  Other times the new payments under the modification will be too high to afford under the current budget.  Chapter 13 plans must follow rigid standards for the repayment of debt as outlined by the bankruptcy code.  The standards of the bankruptcy code limit how far (and how many times) a Chapter 13 plan can be modified.

Falling Behind May Force You to Consider Other Options

Sometimes falling behind on payments simply means one thing: the Chapter 13 plan is failing.  If you fall behind on payments in Chapter 13, it may force you to consider other options.   For instance, if you were attempting to bring your mortgage up-to-date in Chapter 13, then you may want to instead pursue a loan modification when the Chapter 13 payments start to fail.    Other times a conversion of your case to Chapter 7 may be in order.   Chapter 7 does not require plan payments and can sometimes eliminate a large amount of debt much easier.  In other cases, sometimes a tax settlement or the settlement of other debts may also be a viable option besides Chapter 13.