This post will complete our look at Chapter 13 bankruptcy issues.
For the past week we've been examining the nature of Chapter 13 cases wherein debtors repay their debts over time using a repayment plan approved by the bankruptcy court. But what happens if the court approves your plan and then due to unforeseen circumstances you are unable to complete it?
The trustee in charge of your case will usually work with you if it appears your difficulty in completing your plan is truly unexpected. He or she may modify your plan by reducing your monthly payments or even grant a grace period in which payments need not be made. Some of the situations in which this may occur include sudden unemployment and unforeseen medical problems.
Trustees can also use their discretion and simply discharge your debts due to hardship. This is relatively rare, but does occur sometimes if the debtor suffers a heavy burden.
If the court rejects your request for a plan modification or a hardship discharge you'll still have a couple of alternatives at your disposal. First, you could shift your case into a Chapter 7 action. This option would be available assuming you haven't received a discharge in a Chapter 7 case during the last eight years. Second, you could simply request a dismissal of your Chapter 13 case. In this case you may owe less due to your payments but then your creditors could also add interest to your debt to make up for the freeze which was imposed on your debts once your petition was accepted by the court.
I hope you've enjoyed our posts on Chapter 13. Keep in mind this is often an effective remedy for high-income earners or people with substantial property holdings.
