What if Chapter 13 Bankruptcy is not Enough?

What if Chapter 13 Bankruptcy is not Enough?

Sometimes things happen. Unexpected medical bills or job loss can throw your finances into turmoil. In this case, Chapter 13 Bankruptcy would be a great option. It lets you pay back your debts while preventing harassment or home loss. But what if something else happens and you can no longer afford the Chapter 13 plan payment? There are a few options available.

The first is dismissing Chapter 13. In most states you can voluntarily drop the Chapter 13 filing. With your attorney's help you can file a motion with a court and begin to deal directly with creditors. If this is the route you choose to take, your first call has to be to your auto lender. It is of great importance that you do not lose your transportation. If you ever hope to get back on your feet and get out from underneath the debt, you need a reliable way to get to and front work. Creditors have an incentive to work with you. If you had been good with payments before the financial trouble and the plan payments, they will work with you. While you were in Chapter 13, they were getting a percentage of the money from the court administrator. This gives them a chance to be repaid directly by you. If you fall into Chapter 7 they will likely not get any of the money you still owe them. This will be a building block from which you are able to repay other debts.

Your next option is to convert to Chapter 7 Bankruptcy. Before converting, it is best to work with your lawyer to determine if this is the correct path. During Chapter 7, you continue to make essential payments but pay nothing to other creditors. However, part of the Chapter 7 process is a liquidation of some assets. If you have equity in your home or an unprotected vehicle they may be seized by the trustee and sold to repay debts. Your attorney will be able to tell you what you can and cannot keep based on your current debt structure.

The final option is a modification of your the terms of your bankruptcy. The last thing creditors want is for you to enter Chapter 7 because of the increased likelihood that they will not be repaid. If there is a drastic change in your financial situation following your entrance in to bankruptcy, the court will likely grant an extension. Take advantage of this extension to work with your lenders. If you show that you are working in good faith, they are likely going to work with you.

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