When you file for Chapter 13 bankruptcy, the core of the bankruptcy proceedings is your Chapter 13 payment plan. This is the plan you submit to the court that proposes how you will pay off your debt through a payment plan. These plans need to be approved by the court, and they can last between 3 and 5 years. 


Once the payment plan is complete, your bankruptcy is finalized. 


It seems simple enough – make the required monthly payments as outlined in your repayment plan and get out of debt in a few years. However, life isn’t always simple, and things can happen that can impact your ability to stick to your plan. If you lose a job, get sick, get divorced, are involved in a serious accident, or another unexpected event that affects your financial situation, you may need to restructure your Chapter 13 repayment plan.


Is Restructuring Your Chapter 13 Payment Plan An Option?

When you start to struggle to make the payments in your plan, you might feel like you’re drowning in debt again as you don’t think you have any options open to you. However, you might be surprised. When you talk to your bankruptcy attorney about your situation, they will likely give you a couple of options to consider. Mainly, you can try to restructure your payment plan, or you can instead try to convert your case to Chapter 7 bankruptcy by showing you no longer meet the financial requirements for Chapter 13. 


How To Restructure with a Chapter 13 Payment Plan Through the Court

If you have a life event that alters your financial situation and prevents you from making the payments outlined in your Chapter 13 payment plan, you can ask the court for help.


If you are early enough in the bankruptcy process and the court has not yet approved your repayment plan, you can talk to the court about your situation and ask if you can file an amended repayment plan based on your new income. If the court and your creditors approve it, then you can go forward with making the altered payments until your plan is complete.


If your repayment plan has already been confirmed, then it can be more complicated. You will need to ask the court to modify your payments to a lower amount that you can afford based on your new available income. You will need to explain your situation, what happened to change your financial circumstances, and possibly provide proof of your current income or additional bills. The court will then decide if your payment plan can be restructured.


If you cannot lower your payments, you can pursue a hardship discharge. To do this, you will need to prove to the court that your new financial situation is likely to be permanent and you cannot resume making the payments outlined in your plan. You will also have to prove you paid an adequate amount of debt back to your creditors – at least as much as they would have received in a Chapter 7 bankruptcy. You will need your bankruptcy attorney to help you through this process and prove your case to the court.


When To Consider Filing For Chapter 7 Bankruptcy

If the court does not approve your restructured Chapter 13 payment plan, and you cannot afford to make your monthly payments, then you should talk to your bankruptcy attorney to determine if you should switch your case to Chapter 7 bankruptcy.


Working with your attorney, you will need to prove you cannot afford to make the payments to pay off your debt.


You might not be able to file for Chapter 7 – or it might not be in your best interests – so it’s essential to work with a bankruptcy attorney to get their advice and decide what the best option is for you and your financial future.


Contact an Attorney

If your financial situation changes and you are unable to make the payments in your Chapter 13 payment plan, you need an expert on your side. It’s crucial to hire an experienced attorney to help you through the process. Our bankruptcy attorneys can review your options with you and help you find the best path for you and your financial future. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.

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