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Short answer: No, you usually can't "skip" a Chapter 13 bankruptcy payment. But if you do, you still have some options.
Chapter 13 bankruptcy is a court-supervised repayment plan. Instead of paying creditors directly, you actually make one structured payment through the court. The amount you pay toward unsecured debts depends on your disposable income and other factors. Most Chapter 13 plans are set for 60 months. However, a few debtors qualify for 36-month plans. Your plan payment is due each month on a specific date based on the day you file your Chapter 13 voluntary petition. Your payments go to a Chapter 13 trustee, who then distributes the money according to your approved plan.
Many people make their payments through payroll deduction. Your employer sends the Chapter 13 plan payment directly to the Chapter 13 trustee each month. Payroll deductions can actually increase your chances of success because the payments happen automatically. Whether you are paying the Chapter 13 trustee directly or the payments are deducted from your wages, a situation may arise that might cause you to miss a Chapter 13 payment. Sometimes life happens, and if something happens where you think you might miss a payment, talk to your attorney right away to get ahead of it. If that happens to you, contact your Chapter 13 bankruptcy attorney immediately. There may be a way to prevent your Chapter 13 case from being dismissed.
If you fall behind, the trustee can ask the court to dismiss your case.
Many Chapter 13 trustees wait until you miss three payments before filing a Motion to Dismiss. Don't assume that your trustee will wait. Some trustees will file a Motion to Dismiss when you miss your second payment. There may be some benefits to having your case dismissed. But for now, instead of focusing on dismissal right away, let's walk through the options you may have if you miss a payment.
There are several ways to get your Chapter 13 bankruptcy case back on track after missing a payment or two.
If you only missed one payment, your best move may be to try to catch up before the next one is due. If you can do this, the Chapter 13 trustee probably will not file a Motion to Dismiss the case. But if missing payments becomes a pattern, the trustee will likely step in.
Some people end up in a Chapter 13 because they couldn't afford the attorney's fees up front to file a Chapter 7.
If you can no longer afford your Chapter 13 plan payments, talk to a bankruptcy lawyer about converting to Chapter 7 bankruptcy. If your income decreased, you might meet the income requirements for the Chapter 7 Means Test. Do you qualify for Chapter 7 bankruptcy? Use the calculator below to help you estimate your Chapter 7 bankruptcy qualification.
If you convert to Chapter 7 and qualify, you could receive a discharge in just a few months without repaying unsecured debts. Remember, some unsecured debts aren't dischargeable, such as most back taxes, student loans, and government debts. If you owe these creditors, you continue to owe the debts after receiving your Chapter 7 bankruptcy discharge.
Your Chapter 13 trustee may allow you to catch up on your payments by making a payment and a half each month for up to six months. Other trustees may set a deadline for you to catch up on your payments. What your trustee is willing to allow depends on your court and your specific case.
Making "a payment and a half" each month isn't easy, but it's sometimes doable if the hardship is temporary. If you can tighten your budget, that may be a way to prevent your Chapter 13 case from being dismissed for failure to pay your payments.
In some cases, you might be able to amend your Chapter 13 plan to restructure your repayment plan. However, a Chapter 13 plan cannot exceed 60 months, so your plan payment will increase each month. The Chapter 13 trustee can object to the amended plan.
Before amending your plan, ask yourself why the payment was missed in the first place. It's a good idea to consider why you missed your Chapter 13 plan payment. For example, if you cannot afford your mortgage payments, you may want to surrender your home. If you surrender your home through your Chapter 13 plan, you can stop making mortgage payments.
The lender would eventually ask the court for permission to move forward with foreclosure. The process could take several months, so you would have time to move before the foreclosure. The time may allow you to save money for a rental deposit and get back on track financially.
If you know that you will be out of work or may face financial hardship, your attorney may file a request for a moratorium. The request asks the court to give you a two to three-month break from making your Chapter 13 plan payments.
This option typically works best when the hardship is temporary and clearly documented. It is important to note that your plan cannot be extended past the maximum number of months allowed by law. Some attorneys intentionally structure plans slightly shorter than 60 months to build in a cushion. The “cushion” provides a 5-year moratorium if a financial crisis requires you to skip up to 3 payments.
Don't wait until the trustee files a motion to dismiss. The earlier you address the issue, the more options you'll usually have.
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