Chapter 13 bankruptcy allows filers to safeguard personal property but has expensive repayment plans. If you can no longer afford payments, our dedicated Wyoming Chapter 13 Bankruptcy Lawyers can help you determine the best alternative.
How Does Chapter 13 Bankruptcy Work?
Chapter 13 bankruptcy, also referred to as a “wage earner’s plan” or reorganization bankruptcy, is a legal process that enables those with regular income to restructure their finances and repay their debts over three to five years. If you earn less than the average income in Wyoming, your payment plan will typically last three years, whereas if you earn more than that amount, your plan will span five years.
This is a popular route as this plan doesn’t involve the liquidation of assets like in Chapter 7. Essentially, you don’t have to worry about having your assets seized and sold to satisfy outstanding debts. A trustee will be appointed to oversee your case, collecting payments and disbursing them to creditors according to the plan’s terms.
What Are My Options if My Chapter 13 Payments Are Too High?
In the unfortunate event that you are unable to afford your Chapter 13 payment, it’s imperative to act promptly. Neglecting this problem can lead to significant consequences, including the dismissal of your case and loss of bankruptcy protection.
Before proceedings, consult your bankruptcy attorney for guidance and advocacy. They can assess your financial situation nd recommend the best course of action given your unique circumstances. Contacting them swiftly will ensure you have the most options to address the issue before it escalates.
Generally, the first possibility is modifying your payment plan to reduce your monthly obligations. You will need to file a motion with the bankruptcy court, explaining why the modification is justified. This involves showing a change in your financial circumstances, like unexpected bills from medical issues or reduced income. The court will review your motion and potentially approve a new repayment plan. It’s important to note that modifications are typically only possible if you were previously paying a percentage to unsecured creditors for non-priority loans.
Another option is to request a temporary suspension or deferral of payments. Should your inability to remit payment be temporary, you may be able to petition the trustee for a temporary suspension or deferral of payments. This is usually subject to the trustee’s discretion and often doesn’t necessitate a court order.
A hardship discharge may be granted in cases of significant and ongoing financial hardship beyond one’s control. To qualify, one must generally demonstrate to the court that creditors have received at least the equivalent of what they would have in a Chapter 7 bankruptcy case, that the hardship was unavoidable, and that financial improvement is unlikely.
Furthermore, if you can no longer make your Chapter 13 payments and meet the eligibility criteria for Chapter 7, including passing the means test, you may be able to convert your case. While this may halt payments, it also means that your non-exempt assets can be seized and sold to repay your creditors.
For more information, please don’t hesitate to contact an attorney at 307 Bankruptcy.
