For many, bankruptcy is not something that is taken lightly, for both the consumer and the filer. As such, you may be relieved when your Chapter 13 bankruptcy goes into effect, offering you additional relief from creditors. However, if something happens and you realize you’ve missed a Chapter 13 payment, understanding the consequences you can face is critical. If this represents your circumstances, you’ll want to keep reading to learn how a Memphis, TN Chapter 13 bankruptcy lawyer can help you navigate these complicated issues.
How Does Chapter 13 Bankruptcy Work?
When you file for bankruptcy, you generally have two options as a consumer. The first is Chapter 7, which involves liquidating your assets to repay creditors. This is the faster option, but your non-exempt assets are at risk during this process. Additionally, you must meet the income requirements for this option. Essentially, you must make less than the median income for households of your size in Tennessee to qualify. If you do not meet the minimum requirements to file for Chapter 7, you can pursue a Chapter 13 filing.
Chapter 13 bankruptcy is a reorganization plan that involves making a monthly payment to your bankruptcy trustee, who will then allocate those funds to creditors. This monthly repayment plan will last three to five years, and once completed, your remaining eligible debts will be discharged.
Will My Trustee Know If I’ve Missed a Chapter 13 Payment?
When you accidentally miss a payment date for Chapter 13, you may think nothing of it. After all, everyone makes mistakes, and the court may not even notice, right? Unfortunately, missing a Chapter 13 payment can have a drastic impact on the outcome of your case.
If you miss a Chapter 13 payment, you can anticipate serious trouble. If you realize you forgot to make a payment or couldn’t make the payment on time due to unexpected financial issues, like a hospital stay, you should immediately contact your trustee and explain the situation. They may grant a one-time exception if you pay the funds immediately. However, it’s not worth the risk.
Missing a payment can result in the full dismissal of your case. This means you are no longer eligible to have debts discharged, and the automatic stay you were granted will be lifted, meaning creditors are free to pursue collection efforts against you again.
In other cases, your case may be converted to Chapter 7, meaning your assets will be liquidated and used to pay the creditors.
As you can see, missing a Chapter 13 payment can have drastic impacts on your case. That’s why it’s in your best interest to connect with an experienced attorney who can help guide you through these complicated times. At the Arnold Law Firm, we understand that this process can be overwhelming, which is why we are here to assist. We can guide you through bankruptcy to help minimize errors that could impact the outcome of your case. When you need help, contact our team today.
