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What happens if I can no longer make payments under Chapter 13?

When individuals agree on a plan, they know that sometimes, circumstances can change that alter that plan. This is true in Chapter 13 bankruptcy as well, as a person's income or intentions may change during the bankruptcy process.

The idea behind Chapter 13 is to set up a repayment plan that allows a Colorado debtor to make manageable payments toward his or her debt over a period of time. Occasionally, however, the person's circumstances can change during the time he or she is making payments under the repayment plan.

Under these circumstances, the debtor is allowed to make changes to the repayment plan, but may need to submit a motion to the court to get the changes approved. This is because the repayment plan, once confirmed, is binding on the debtor and creditors. Accordingly, court approval is needed to alter the provisions of the repayment plan.

For example, if an individual loses his or her job during the repayment plan period, he or she may be unable to continue to make the regular payments required under the plan. As a general matter, if a debtor fails to make payments, the Chapter 13 case may be dismissed, or converted to a Chapter 7 bankruptcy.

However, if the person makes the appropriate motion to the court, the trustee may be able to modify the repayment plan to make it work for the debtor under the changed circumstances. Thus, if the person loses a job, or endures an incident that would make continued payments an undue hardship, such as a hospital stay, the plan might be modified. Alternatively, the judge may allow a discharge of some further debt.

Ultimately, the workings of the repayment plan require some consideration and effort. A qualified bankruptcy attorney can assist the debtor with working through the repayment plan and determining the impact of changed circumstances.

Source: Chicago Tribune, "Swift justice: Chapter 13, cross-country claims and property titles," Jackie Glass, May 14, 2013