What if I Can’t or Don’t Want to Continue My Chapter 13 Bankruptcy?
You may have filed for a Chapter 13 bankruptcy after an unexpected event caused you to have trouble recovering financially, despite a good income. Those who file may have suffered an accident or become sick, or may have a family member who fell ill and must be taken care of. Credit card debt may have gotten out of control or a divorce may have taken place—or worst case scenario—all the above may have happened.
The Chapter 13 Repayment Plan Lasts Three to Five Years
While eligibility for the Chapter 7 bankruptcy is often hoped for, this may not be possible if you make more than the median household income in your state. In that case, you won’t quality for a discharge of debts, but you may be able to file for a Chapter 13 bankruptcy which allows you to re-pay creditors over a period of three to five years. Although this is a significantly longer process than the Chapter 7 (three to six months), you do walk away with most of your debts paid—excepting those which you may have reaffirmed such as a house or car, along with typically non-dischargeable debts such a student loan debt or back taxes.
Filing for Chapter 13 is a commitment. First, there is the initial effort that goes into beginning the process, from consulting with your bankruptcy attorney to organizing all the necessary documents. You must attend the meeting of creditors and the confirmation hearing, along with attending credit counseling. A repayment schedule is set and you are on the path to having your debts paid off, hopefully within several years.
You Could Benefit from a Dismissal if Circumstances Change
What happens however, if you change your mind while already in the middle of a Chapter 13 repayment plan? First, understand that is your right. Next, understand that there can be some consequences, and you will want to discuss the process of voluntary dismissal with your attorney. You may have had changes to your income or living situation which precipitate the dismissal, allowing you to proceed in a positive way now without the repayment plan.
Perhaps you originally wanted to file bankruptcy in hopes of saving your home, allowing you time to catch up on late payments and move forward. You may have found a better job though and caught up on mortgage arrears. After speaking to your bankruptcy attorney, you have decided that a voluntary dismissal would be in your best interest.
Plan for the Negative Consequences
As for consequences, the first thing to consider is that the automatic stay is lifted. As an injunction that causes nearly all collection activity to be halted immediately upon your filing of the bankruptcy, this offers substantial protection. With a voluntary dismissal, you are at the mercy of debt collectors and mortgage and car lenders right away. Be sure you have a plan for dealing with them, as well as preparing for any foreclosure or repossession efforts that may ensue.
All the debt you owed going into the bankruptcy will most likely still be there. As you leave the Chapter 13 early, you may want to discuss a debt management plan with your attorney, working to pay off the credit card debt that is left in one lump sum if possible.
Contact us with All Your Bankruptcy Questions
If you have questions regarding bankruptcy, contact the attorneys at Fitzgerald & Campbell, APLC. We can review your current situation and discuss your options with you. We are here to help. Call us today for a free consultation at (855) 709-5788, or email us at email@example.com.
Posted in: Bankruptcy