I Cannot Make My 13 Bankruptcy Payment: What Options Do I Have?

During the coronavirus pandemic, many residents of Chicagoland are being laid off from their jobs or temporarily furloughed, and as a result, many people are unable to work and to make payments on their Chapter 13 bankruptcy plans. Since the promise of a debt discharge at the end of the repayment period requires a debtor to make timely payments on the plan, it can be incredibly anxiety-inducing to think that you will not be able to uphold the terms of your Chapter 13 repayment plan. Whether you are having difficulty making your Chapter 13 payments as a result of the COVID-19 emergency or because of a job loss or illness unrelated to the pandemic, it is important to understand the options that may be available to you. The following are some of the options you should consider with the help of an Oak Park bankruptcy lawyer.

Request a Moratorium
You may be able to get a moratorium on your repayment plan under U.S. bankruptcy law. Typically, a moratorium will last for a short time, and no longer than a 90-day period. The moratorium will not change any of the terms of your repayment plan, but it will allow you to stop making payments for the period of the moratorium without impacting your ability to receive a discharge. A moratorium can be granted for reasons such as a temporary loss of employment, a temporary injury, or a temporary and significant unexpected expense. The moratorium will not change the terms of your repayment plan.

Seek a Modification
If you have experienced a change in circumstances, you may be able to modify the terms of your repayment plan. If you have been forced to take a job that pays less money or you are a small business owner who has experienced significant business losses, you may be able to have your monthly payments modified to a lower amount based on your current disposable income.

Consider Converting to Chapter 7
If you were ineligible for Chapter 7 bankruptcy when you filed and developed your repayment plan, your situation may have changed if you no longer have a regular income. As you may know, in order to be eligible for Chapter 7 bankruptcy, you must be able to pass the “means test,” and most Chicago residents with steady incomes will not be able to pass the test. Accordingly, most of these debtors end up filing for Chapter 13 bankruptcy. If you lost your job, you could now be eligible for Chapter 7 bankruptcy and may be able to convert your case.

However, if you filed for Chapter 13 bankruptcy in order to avoid foreclosure, you will not want to convert to Chapter 7. Instead, you should speak with your bankruptcy lawyer about pursuing a moratorium or a modification based on your changed circumstances. Other options also may be available to help you during this time.

Seek Advice from a Chicago Bankruptcy Attorney
Do you have questions about managing your Chapter 13 bankruptcy payments? In certain circumstances, you may be able to get temporary relief while still maintaining your eligibility for completing the bankruptcy plan and receiving a discharge of your remaining debts. During the pandemic, the CARES Act provides specific modification options to Chapter 13 debtors beyond those discussed here, but these are short-term options.

An experienced bankruptcy lawyer in Chicago at our firm can assist you. Contact the Emerson Law Firm to learn more about the services we provide to consumers in Oak Park and throughout Chicagoland.


See Related Blog Posts:
What is a Common Chapter 7 Bankruptcy Timeline?
Personal Bankruptcy for the Self-Employed: Five Things to Know



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