If your financial situation worsens before completing your Chapter 13 bankruptcy repayments, you should consider petitioning the court for a modification of the original plan. Here are some of the routes this modification may take:
Suspending the Payment Plans
Suspending the payment is only possible if you are absolutely broke and doesn't have even a cent for the payments. This option is best if you are sure your poor financial situation is only temporary. You will need to prove why your change in circumstances is temporary, what you are doing to improve it, and when you expect an improvement. For example, it may suit you if you have lost a job and have been promised another one to start in a few months.
Reducing the Payments
This may work if your financial situation has deteriorated, but you haven't hit rock bottom yet. You will need to work with the trustee to determine the amounts you can repay without leaving you destitute. It is suitable for those who have experienced pay cuts or are experiencing low sales in their businesses but are still in business nonetheless. For example, if you used to have paid overtime but the employer has stopped them, you may reduce your payments to a level that can be supported by your basic pay alone.
Extending the Length of Your Plan
Chapter 13 bankruptcy payments usually last for between three to five years. If you were originally on course to get your discharge after three years, you might be able to extend it to five years if your financial situation dips. Of course, you will need to come up with a new payment plan to ensure that this is not just a ploy, but you are really capable of making the renegotiated payments.
Getting New Debt
The bankruptcy court may allow you to incur new debt, especially if it can improve your financial situation and help with your overall bankruptcy plan. For example, if you are sick and can't afford medical attention, a new debt may help you get treatment. In the long run, this will also help you with your financial situation since it's difficult to work if you are sick.
Modifying your bankruptcy plan is possible, but only if you have a legally acceptable reason and a viable plan for making the payments henceforth. If your financial situation has tanked and you can't make any payment to your creditors, then you may be a candidate for a hardship discharge. Talk to your bankruptcy lawyer, like Geranios Law PLLC, for this option.