In the period between the filing of a Chapter 13 plan and its confirmation, debtors may fall behind making their monthly plan payments. Eventually, the local assigned Chapter 13 bankruptcy trustee or a creditor will file a motion requesting the court to dismiss the case. However, even in this situation, debtors have options available to keep a bankruptcy active and eventually obtain a discharge.
The options available are as follows:
- Become current on payments;
- Let the case be dismissed and file a new one;
- File a motion for a moratorium on plan payments and amended Chapter 13 plan;
- Convert the case to Chapter 7; or
- Request a hardship discharge
The first option may not really be an option. If the debtor had the money in the first place, he or she would not be delinquent. However, circumstances arise where debtors may receive income which allows them to become current on plan payments. Thus, for obvious reasons, this is always the first choice to solve the problem.
If a chapter 13 case is unaffordable, meaning debtors are unable to make monthly plan payments, a voluntary dismissal may be the proper course of action. However, if another chapter 13 case is filed soon thereafter, the debtor may have to request the bankruptcy court to extend the automatic stay to certain creditors. This is a complicated analysis which requires the assistance and advice of a qualified bankruptcy attorney.
A motion may be filed to place a moratorium, or temporarily suspend, plan payments. Of course, a debtor must provide a valid reason such as illness or temporary unemployment. A moratorium typically lasts for three months. Any longer and the debtor puts himself in a precarious position trying to become current with payments since a moratorium is going to raise the monthly amount of future plan payments. Thus, the debtor usually files an amended plan with a motion for a moratorium.
A Chapter 13 case may be converted to a Chapter 7 case. This may not be an option if the purposes of the case filing include discharging priority debts or curing mortgage arrearages. A debtor may request an early Chapter 13 discharge prior to plan completion due to hardship. However, this is subject to the same limitations as a Chapter 7 case and such discharges are rarely obtained.