You made the brave decision to file for Chapter 13 bankruptcy in order to regain control over your finances. You have a payment plan in place and can finally see light at the end of the tunnel. However, what happens when life throws you a major curveball, such as a job loss or significant medical emergency? These sudden changes can be overwhelming, but it’s important to know that your bankruptcy case is not fixed. The court recognizes that circumstances can change, and there are legal ways to modify your plan.

The Foundation: Your Chapter 13 Payment Plan

First, let’s take a look at how Chapter 13 bankruptcy plans work. When you work with Augusta bankruptcy lawyers, you propose a three-to-five-year payment plan for the court. This plan is based on careful assessment of your income, assets, and essential living expenses. The aim is to create manageable payment schedules that protect your most important assets such as your home and vehicles, while helping to eliminate unsecured debts such as credit card balances and medical bills.

The Automatic Stay is Your Shield, But Communication is Key

Filing for Chapter 13 bankruptcy immediately activates an automatic stay. This court order prevents creditors from taking further action, such as foreclosure, repossession, or wage garnishment. This protection will remain in place for the duration of your bankruptcy case, as long as it remains active.

If you miss a payment on your plan due to job loss, your Chapter 13 trustee may file a motion to dismiss your case. If the court agrees, the automatic stay will be lifted and creditors will be able to resume their collection efforts immediately. Therefore, it’s important to communicate with your bankruptcy attorney as soon as possible.

Legal Options When Your Income Changes

The bankruptcy code provides mechanisms to help debtors who are experiencing genuine financial hardship. If you find yourself in this situation, you are not alone. Your attorney can file a motion with the court requesting one of the following options:

Modify Your Plan

If your income has been reduced permanently or for an extended period of time, your attorney may be able to petition the court to reduce your monthly payment. This is often a simple solution that can be quickly implemented. The court will consider your current financial situation and, if necessary, approve a new payment that better reflects your ability to pay.

Request a Hardship Discharge

In extreme circumstances, where you are unable to continue making plan payments due to unforeseen circumstances, your lawyer may request a hardship discharge. This is not a guaranteed option, and there are strict requirements for it. The court will need to determine that your inability to complete the plan was not your fault, and that unsecured creditors would receive at least what they would in Chapter 7 bankruptcy.

Convert to Chapter 7

If you no longer have enough disposable income to continue with a Chapter 13 payment plan, but you still want to reduce your debt, converting to Chapter 7 bankruptcy may be an option. This process eliminates eligible unsecured debt without the need for a repayment plan. Your lawyer will evaluate whether you qualify for Chapter 7 based on your current financial situation.

The Immediate Steps to Take During a Financial Emergency

When a crisis occurs, don’t delay. Taking quick action can save your situation and your new beginning.

• Contact Your Bankruptcy Attorney As Soon As Possible: This is the most crucial step. At Duncan Bankruptcy Law, we are here to assist you through this difficult process. The earlier we learn about the situation, the more options we will have to help you.
• Do Not Simply Stop Making Payments. Ceasing payments without the approval of a court will put your case at immediate risk of being dismissed.
• Document Everything: Keep records of your job termination, unemployment benefits, medical bills, or any other evidence of your changed circumstances. These documents will be essential when filing a motion with the court.

You Don’t Have to Face This Challenge Alone

A job loss or financial emergency during Chapter 13 can be a difficult challenge, but with the right legal assistance, it can be overcome. The bankruptcy system is designed to be flexible and accommodating for those facing genuine financial hardship.

At Duncan Bankruptcy Law, we have handled over 10,000 cases and have the expertise to navigate these difficult situations. We understand that your life doesn’t stop after you file for bankruptcy, and we are dedicated to helping you find a resolution that protects your financial future.
If you are facing a financial emergency while going through Chapter 13 bankruptcy, please do not panic. Contact us immediately for an evaluation of your case. We will review your situation and work to find the best course of action for you and your family.