Your primary duty in Chapter 13 bankruptcy proceedings is to fulfill your court-approved repayment plan. Essentially, this repayment plan may allow you to reorganize your debts and figure out a monthly payment amount that is reasonable and manageable given your current financial situation. Ultimately, the goal is to pay your outstanding creditors within three to five years. With this, you may wonder what might happen if you fail to uphold this responsibility. Follow along to find out the possible consequences of missing a bankruptcy payment and how a proficient Louisville, Kentucky Chapter 13 bankruptcy lawyer at Schwartz Bankruptcy Law Center can help prevent this from ever happening.

Are there consequences for missing a Chapter 13 bankruptcy payment?

First of all, you must understand that your Chapter 13 repayment plan may commence straightaway. This is to say that there is no grace period, as you must make your first payment within 30 days from the date on which you filed. Of note, this is regardless of whether or not the Kentucky bankruptcy court has approved your proposed repayment plan yet.

Then, you must understand that if you consistently miss your scheduled monthly payments, then you may be considered in breach of your Chapter 13 repayment plan. With this, your bankruptcy trustee may hold the right to file a Motion to Dismiss for Material Default. Meaning that, if the court grants this order, your Chapter 13 bankruptcy case may be entirely dismissed. In turn, a failure to receive a Certificate of Final Payment may mean the court may no longer discharge your eligible debts.

Another possible consequence is that your trustee may file a motion to convert your Chapter 13 bankruptcy case into a Chapter 7 bankruptcy case. This is so the court may grant them the right to retain your eligible assets for liquidation. In turn, they may use the funds from this liquidation to pay your creditors whom you neglected in your original repayment plan.

What should I do if I anticipate missing an upcoming payment?

Being that missing Chapter 13 bankruptcy payments is a serious issue, you must be proactive about it. In other words, you must take certain actions if you anticipate missing one or more of your upcoming, scheduled payments. Such actions are as follows:

  • You may be transparent with your bankruptcy trustee, along with negotiating an extension on your upcoming, scheduled payment.
  • You may petition for the court to extend your repayment timeline from three years to four or five years, if applicable.
  • You may petition for the court to reduce your payments due, if you can prove that you underwent unexpected financial blunders.
  • You may petition for the court to grant a hardship discharge, if you can prove that you underwent an unforeseeable financial hardship.

When handling an urgent matter like this one, you must drop everything and call a talented Louisville, Kentucky consumer bankruptcy lawyer. Our team at Schwartz Bankruptcy Law Center can help you pick up the pieces.