When you have made the difficult decision to file for bankruptcy, you understand the impact that this can have on your finances and credit score. As such, doing everything in your power to ensure you can reap the benefits of this process is critical. If you are currently in a Chapter 13 payment plan as a debtor in Rockland County, falling even one day behind on payments can have significant consequences for your case, as the Southern District of New York Bankruptcy Court is responsible for ensuring compliance. The following blog explores what you should know about these matters, including the importance of working with a Rockland County Chapter 13 bankruptcy attorney to help you understand your legal options.
Understanding the Chapter 13 Repayment Plan in New York
Chapter 13 bankruptcy involves receiving a court-approved payment plan in accordance with Bankruptcy Code § 1322 and § 1325.
Key Features of Chapter 13 Bankruptcy
- The plan will generally last three to five years, depending on income and the type of plan
- Payments will be made to the Trustee assigned to your case who is responsible for dispersing payments to creditors
- Payments will be distributed based on priority
- Approval of the Chapter 13 bankruptcy plan creates a binding legal obligation to adhere to the terms and conditions set by the court
What Happens After You Miss a Scheduled Bankruptcy Payment?
Under federal bankruptcy law, missing a required Chapter 13 payment can result in the dismissal of your case or conversion to a Chapter 7 liquidation plan.
It’s necessary to understand that, unlike other debts and payments, missing your bankruptcy payment can result in a number of serious legal and practical consequences. Understanding how these happen and the potential steps you can take to remedy these matters is critical.
Common Outcomes of a Missed Chapter 13 Payment
- The Chapter 13 trustee assigned to your case may file a motion to dismiss the case with the bankruptcy court
- If the court agrees and your case is dismissed, the automatic stay will end immediately
- Loss of the automatic stay allows creditors to resume collection efforts, including:
- Wage garnishment
- Property repossession
- Foreclosures
- Lawsuits
- The court may also decide to convert your case to Chapter 7 instead of dismissing it
Can You Fix a Missed Payment?
Missing a Chapter 13 payment is a serious issue in Rockland County and across New York. However, under certain circumstances, debtors may be able to resolve the matter and continue on their Chapter 13 repayment plan as intended.
Options if You Have Missed a Payment
- You may be allowed to pay the missed amount and additional late fees before resuming payments
- Contact your default immediately with your attorney and Chapter 13 trustee
- You may be able to seek a plan modification if your financial circumstances have changed
- If you are experiencing extreme financial hardship, you may be eligible for a hardship discharge, though these are rare and are examined on a case-by-case basis
Can Missing Payments Impact Debt Discharge in New York?
Because Chapter 13 is intended to repay as many debts as possible before receiving a discharge at the completion of your plan, missing a payment and therefore breaching your legal obligations, can have a considerable impact on your ability to receive a discharge. A Chapter 13 discharge is only available to those who have successfully completed their repayment plan by making all required payments.
Impact on Discharge Eligibility
- To be eligible for a bankruptcy discharge, you must complete all plan payments as required by the court
- In the event your case is dismissed, you will be ineligible for a discharge
- A conversion to Chapter 7 may also impact what debts you are eligible to have discharged at the completion of your case
When a Plan Modification May Be Appropriate
As mentioned, there are instances in which a default on a Chapter 13 payment can lead to the modification of your current plan. This is often the case when someone has experienced a change in their financial circumstances that prevents them from adhering to the court-ordered bankruptcy plan. Debtors in Rockland County must file a motion to modify their bankruptcy plan with the U.S. Bankruptcy Court for the Southern District of New York.
Modification and Hardship Options
- A debtor may file a motion to modify the Chapter 13 repayment plan
- The court may find that the charges are justified as a result of financial circumstances
- In limited instances in which circumstances beyond your control impact your ability to make payments, a hardship discharge may be awarded
Contact an Experienced Bankruptcy Attorney Today
If you believe you are going to miss a Chapter 13 payment, or you have missed a payment already, contacting an experienced bankruptcy attorney is imperative to fighting for the best possible outcome. At the Law Offices of Allen A. Kobler, Esq., P.C., we understand how complicated this process can be to navigate. That is why our firm is committed to helping you fight for the best possible outcome during these difficult times. Contact us today to learn more.
