What If I File a Chapter 13 Bankruptcy and Can’t Make the Payments?

A chapter 13 bankruptcy is a reorganization bankruptcy in which the debtor’s goal is the entry of an order confirming their proposed chapter 13 plan. Once the plan is confirmed then the debtor makes payments pursuant to the plan for typically 36 to 60 months. When the plan payments have been completed then the court enters a discharge order. As debtors’ attorneys, once we get a confirmation order entered we don’t hear from our clients again; they just make the required plan payments, complete the plan and get a discharge order, right? No.  That is the way it is supposed to work in theory. But, as they say “the best laid plans…”

Chapter 13 Bankruptcy Plan Payments

The reality is that life happens and debtors may have trouble at some point making their plan payments. A chapter 13 debtor may find it difficult to stay current under their plan. Such payment defaults can trigger a chapter 13 trustee’s or a creditor’s motion to dismiss the case. So, the answer is that we must be proactive and take steps to help our clients avoid plan defaults.

Suspended Payments vs. Plan Payment Modification

We often hear chapter 13 attorneys talk about getting an order entered suspending plan payments, but what is really necessary is a plan modification. The entry of a confirmation order binds the debtor and their creditors to the terms of the plan under 11 USC §1327. The code provides a procedure to modify a confirmed plan under §1329. The procedure for a plan modification is found in Fed. R. Bankr. P 3015(h) and there are additional requirements under E.D. Mich. LBR 3015-2. The court will often consider hearing the on an expedited basis if the procedures are followed under Fed. R. Bankr. P. 9006(c) and L.B.R. 9006-1(b). Please also note that the CARES act permits a plan to be modified to extend the plan period up to seven years after the first payment under the original confirmed plan became due.

So, please rest assured that, if you file a chapter 13 bankruptcy case, you have options if you find that you can’t make the payments.

Get Expert Help

If you are facing the need to file a chapter 13 bankruptcy and are concerned about the process and planned payments associated with your case, we encourage you to contact us as soon as possible.