A Chapter 13 bankruptcy is also called a wage earner’s plan or reorganization bankruptcy. In order to qualify for a Chapter 13 bankruptcy filing, you must show the court that you have a regular income and you are capable of committing to a repayment plan that will enable you to repay all or part of your debts in 3-5 years. Our skilled Phoenix bankruptcy attorneys can counsel you so that you may fully understand how Chapter 13 bankruptcy works and what your options are in case you can no longer comply with your repayment plan.
Don’t fret, there is still hope.
You actually have several options if you are unable to settle your monthly dues as stated in the repayment plan. These include: modifying the amount of your monthly Chapter 13 payments, temporarily stopping your chapter 13 plan payments, or converting your Chapter 13 bankruptcy case to a Chapter 7 bankruptcy.
Let us walk you through these options:
- Modification of monthly payments
In order to modify your chapter 13 bankruptcy plan payments, you will be required to submit documentation to the bankruptcy court that show your circumstances together with the reasons why you can no longer afford to settle your monthly payments. The modification may be granted if you are able to present proof of extreme hardship.
- Suspension of Chapter 13 bankruptcy payments
To temporarily stop bankruptcy payments, your bankruptcy attorney must file a request with the bankruptcy court presenting your financial situation and the reasons why you will be temporarily unable to pay your dues. Be aware that this is a short-term solution and you may be required to increase your monthly payments in order to make up for the missed payments
- Conversion to Chapter 7 bankruptcy case
You can convert your Chapter 13 case to Chapter 7 at any time if you have not received a Chapter 7 bankruptcy discharge within the last 8 years. You simply file a Notice of Conversion with the court and pay a conversion fee. You must also qualify by passing a “means test” which was designed to limit the use of Chapter 7 bankruptcy to those who cannot pay their debts. It does this by deducting specific monthly expenses from your “current monthly income” (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly “disposable income.” Converting to a Chapter 7 is often granted if changes have occurred in your life that make it impossible for you to keep up with your monthly payments. It is deemed reasonable that your financial situation is affected because you have either lost your job, took pay cuts, got shortened working hours, or you have become disabled.
If you are considering converting from Chapter 13 bankruptcy to Chapter 7, it is highly-advisable to seek the counsel from an experienced Arizona bankruptcy attorney. Our Phoenix Fresh Start bankruptcy lawyers will make sure that your transition to a Chapter 7 bankruptcy goes without a hitch.
If you or someone you know is finding it difficult to deal with Chapter 13 bankruptcy payments, contact our Phoenix Fresh Start bankruptcy attorneys to discuss your options. Don’t delay in taking the next crucial step to financial freedom. Call us now!