What Happens if You Miss Payments in Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a great option for people struggling with debt. If you are successful with your case, you will draft a repayment plan so you can repay most of your debts. Chapter 13 relies on the repayment plan and so, it is critical that you comply with it and make all necessary payments on time. Failing to do so will result in harsh consequences. Below, our Orlando Chapter 13 bankruptcy attorney explains what these are.
The Repayment Plan May Not Be Approved
Filing Chapter 13 bankruptcy does not automatically mean you qualify. First, the bankruptcy court must approve your proposed repayment plan. This happens during a court hearing, which may not be held until several months after you file. The waiting period allows the bankruptcy trustee and your creditors to determine if the repayment plan pays the creditors the amount they are entitled to receive,
Still, many people do not realize that they must start making Chapter 13 payments approximately 30 days after the case is filed with the court. This is to ensure your bankruptcy case is resolved within 60 months, the maximum amount of time a Chapter 13 case can take. If you fail to start making payments, the trustee would likely object to the proposed plan because it seems as though you already cannot afford the payments.
Creditors Can Seize Property
If your repayment plan includes payments on secured debts, such as a vehicle or your home, and you fail to make the payments, the lender can seize the property. They must first file a motion asking the court for permission to seize the property due to a failure to comply with the repayment plan.
While the court will issue an automatic stay at the beginning of your case, which normally stops these creditor actions, the stay is replaced by the Chapter 13 repayment plan once it has been approved by the court. Lenders can also ask the court to lift the stay to allow for repossession or foreclosure.
The Court Might Dismiss Your Bankruptcy Case
If the bankruptcy court approves your plan and you fail to make the necessary payments, the judge may dismiss your case. They will do so without discharging, or eliminating, your debts. You will receive credits for any debt you have repaid, but creditors can also charge interest that would have accrued if you had not filed for bankruptcy.
Our Chapter 13 Bankruptcy Attorney in Orlando Can Advise You of Your Legal Options
Realizing that you will have difficulty making Chapter 13 payments is very stressful, particularly when you understand the harsh consequences you may face. At Florida Law Advisers, P.A., our Orlando Chapter 13 bankruptcy attorney can advise you of the options available to help you avoid those consequences and still discharge or reduce your debt. Call us now at 1 (800) 990-7763 or chat with us online to schedule a consultation with our experienced attorney and to learn more about how we can help with your case.
Source:
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics
