Chapter 13 bankruptcy cases are repayment plans that can be an effective tool to use to resolve financial problems in a variety of scenarios. Chapter 13 gives people a way to restructure their finances while being able to retain their home, their car, and other assets that would otherwise have to be turned over to creditors.
The flaw in this theory is that the chapter 13 payment is calculated shortly prior to the Chapter 13 case being filed with the bankruptcy court. Chapter 13 plans last for a minimum of 36 months, up to a maximum of 60 months. While the monthly payment might be realistic at the time the case is filed, a lot can change financially over two, three, four or five years. If the changes are not positive, a Chapter 13 debtor might find themselves in a position where they can’t afford their monthly payment.
If some financial reversals happen after a Chapter 13 case is filed, there is no need to feel defeated. A Chapter 13 debtor has several options available to stabilize the Chapter 13 plan so that the debtor can receive a bankruptcy discharge.
A debtor in a chapter 13 plan who has fallen behind in payments can work out a catch-up program called a cure order, or, if the new financial normal means less take-home pay, modify the plan to adjust payments to better fit a budget.
The key is communication with your lawyer. If there’s a financial reversal don’t give up hope! Your attorney can help you get back in position to get your life back. Contact the attorneys at Kain & Scott to make sure you finish your Chapter 13 successfully.