What happens to me if I consecutively default on chapter 13 bankruptcy payments?

A Chapter 13 bankruptcy allows you to restructure your debt to make more manageable payments. Under the repayment plan, you pay both current debts as well as arrearage debt, usually at lower rates and/or monthly payments. Many debtors utilize Chapter 13 to save their homes and other collateral assets. However, defaulting on the requisite payments will cause the bankruptcy case to be dismissed and the automatic stay will be lifted. This means that the creditors can again pursue you for full payment. You default on a Chapter 13 bankruptcy when you miss consecutive payments to the bankruptcy court.

You can do the following to prevent your Chapter 13 bankruptcy case from being dismissed for default:

• Pay the Money. When you file for Chapter 13 you begin payments before your case is confirmed by the bankruptcy court. Confirmation occurs when the court agrees to the submitted repayment plan. However, when you miss consecutive payments, the court can issue an automatic dismissal before the case reaches the confirmation stage. If you can, try to catch on all payments to avoid dismissal.

• Request Temporary Relief. If you have suffered a temporary unavoidable setback, you may request a specific amount of time to modify the repayment plan. If granted by the trustee, you may receive temporary relief from payments until you can afford to pay them again.

• Move to Reinstate. If your case is dismissed, you may gather the money to repay the arrearage you owe and file a motion to reinstate your Chapter 13 case. Repaying the money makes it possible to re-open and maintain your dismissed bankruptcy case. Some courts and trustees allow reinstatement if you make up all the missed payments and request a reinstatement no more than a few months after your case is dismissed.

• Re-file Chapter 13. If you default on your Chapter 13, you are allowed to re-file if you request the dismissal or if the default occurs because you did not strictly follow court orders. You have to start the whole process over again including a new repayment plan. You may still prevent the loss of your home, your car and the garnishment of your wages. However, a re-filing for Chapter 13 has strict rules, including qualification and waiting 180 days after cases have been dismissed before filing again.

Talk with an experienced bankruptcy attorney to further discuss what happens when you default on Chapter 13 bankruptcy payments.