A Chapter 13 bankruptcy is a multi-year process. In addition to waiting for hearings in court, filers also have to complete a lengthy repayment plan. The person seeking relief through a Chapter 13 filing makes a single monthly payment to the courts, which the trustee assigned to their case distributes to their creditors. The amount paid, the amount each creditor receives and the duration of the plan all depend on the unique financial circumstances of the filer. What they pay relates to what they earn.
What happens after a Chapter 13 filer suddenly loses their job?
Modifying the repayment plan
In many cases, those pursuing Chapter 13 bankruptcy can ask the courts to modify or adjust the repayment plan. After providing the courts with documentation about their change in circumstances, it may be possible to reduce the monthly payment accordingly. Modifications may make it possible for the filer to complete their repayment plan and pursue a discharge.
Converting the case
Sometimes, modifying the plan is insufficient, as the filer does not yet have any leads on a job. They may have already exhausted their resources trying to make their monthly payments to the courts. In such scenarios, filers may be eligible to convert a Chapter 13 bankruptcy to a Chapter 7 bankruptcy. They need to pass the means test and meet other standards imposed by the courts.
Chapter 13 filers worried about how job loss might affect their bankruptcy proceeding may need to consult with a lawyer. Securing legal guidance can be beneficial, especially in cases wherein a filer who has lost their job initially submitted paperwork on their own behalf. An attorney’s support can prove invaluable when dealing with a complex Chapter 13 bankruptcy issue.