What options do you have if 3 or 4 years into your 60 months (5 years) plan you lose your job or your income is reduced substantially? The answer is unfortunately, “It depends.” Is your case asset or income driven? Is your job loss permanent or temporary? Was it an unexpected expense, like a water heater failed or transmission needed to be replaced? Each scenario presents different answers.
Suspend a Chapter 13 Payment Plan
For instance, if it is a temporary job loss or an unexpected expense, a simple motion to suspend your Chapter 13 plan payment for up to 3 months could be a very straightforward solution to the short-term problem.
Modify or Convert
If it is a permanent job loss or maybe you are unable to work at all for some reason and will now be relying on unemployment compensation or social security disability then your answer lies in whether your case is driven by assets or income. If it is income driven, then the solution could be that you could either modify your existing Chapter 13 payment to a lower more reasonable monthly amount or convert your case to a Chapter 7. If you are eligible to convert, then you will not have to make any further Chapter 13 payments, but will have a Court Hearing much like your initial Chapter 13 hearing (called the 341 Hearing) about 30 days after you convert.
On the other hand if you are able to modify your existing Chapter 13 payment to a lower monthly amount, then you will have to ask the Court to approve this modification. This Court hearing is usually held a month later and your attorney will typically be the only one that has to attend. You will simply need to make a good faith payment of the new amount before your Court hearing.
If your case is asset driven, which means you have a home that is paid for and/or you have substantial equity in your residence, then you have two options. Continue to make the payments or if that is not feasible, you might have to let your case be dismissed. This is not the end. You might be able to simply re-file. With all the debt paid down in your previous case, a fresh 60 months might allow the payment in your new case to be lower and still pay the required equity to your creditors.
We Can Help
At Bond & Botes, if you ever find yourself in this situation, we will have you schedule an appointment and sit down with you and discuss all your options face to face. Our goal is to make your life as stress free as possible.
Also, if you are not presently in a Bankruptcy but are struggling to pay credit cards, medical bills or personal loans, not to mention your mortgage and vehicle loans, please call one of our conveniently located offices at Bond & Botes to set up a free, private consultation with one of our experienced attorneys.
We will analyze your situation and help you make the best decision possible to help you navigate your financial problems.
Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999.Read his full bio here.