What happens if you are in a Chapter 13 repayment planand then suffer a loss of income?

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What happens if you are in a Chapter 13 repayment planand then suffer a loss of income?

We filed for a Chapter 13 bankruptcy about 18 months ago. Have been making payments but went through back surgery for a third time. Could face disability and have a 40% cut in my wages and supply my own health insurance. What advice do you have for us.

Asked on June 18, 2011 under Bankruptcy Law, Missouri

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

There are often situations that occur so that you will become unable to make the payments as outlined in your repayment plan.  For instance, if you lost your job after getting into the repayment plan or, as in your situation, you suffer a reduction in pay. In such a case the bankruptcy trustee may be able to modify your repayment plan according to your new income.  Additionally, if making payments on the repayment plan would pose an undue hardship (e.g. if you had a lengthy hospital stay or convalescence), a bankruptcy judge has the discretion as to whether or not to discharge your debts outright. However you may not have paid enough down in just 18 months.

If neither of these options were available to you, you may be able to convert your Chapter 13 reorganization to a Chapter 7 liquidation.  At this point you should consult directly with a bankruptcy attorney in your area, or at least contact you bankruptcy trustee to inform then of your situation.


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