With a record number of foreclosures being filed, many people are quickly deciding that filing bankruptcy is not such a bad idea. Chapter 7 bankruptcy will only stop a foreclosure temporarily, unless the debtor can come up with a way to pay all the arrears on their mortgage. If that's not done, the lender will file a motion for relief of stay which will allow them to continue with the foreclosure. Because of this, Chapter 13 bankruptcy is getting a lot of attention. In Chapter 13, the debtor will be able to keep all of their property while catching up on back payments over a 3 to 5 year period. A Chapter 13 bankruptcy will allow the debtor to negotiate based on their income and expenses, a payment plan that will be feasible. For someone that is gainfully employed this seems like a win-win situation for an individual facing foreclosure. If the debtor's financial situation changes after the bankruptcy is filed, the debtor can go back in and file a motion to make changes to the payment plan.
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After filing bankruptcy under Chapter 13 it's important not to miss any payments. If you stop making your Chapter 13 bankruptcy payments and don't contact the bankruptcy trustee, the case will be dismissed and you no longer will benefit from the discharge. Immediately following the dismissal of the case the automatic stay will be released and the debtor will no longer be protected. Usually, when a debtor does this the creditors come chasing after them with a vengeance. Most creditors will immediately file a lawsuit in court to get a judgment against the debtor. Once they get the judgment, they will be able to garnish your wages, attach your bank accounts and take any property that is not tied down.
Traditionally, when you complete your Chapter 13 bankruptcy payment plan the court enters an order discharging all leftover dischargeable debts. The bankruptcy discharge prevents creditors from coming back later to try and collect from you. To be successful in a Chapter 13, the debtor needs to make all their payments required by the negotiated payment plan. Not being able to complete the payment plan means no discharge. If the debtor can no longer make their payments they need to immediately contact a bankruptcy attorney to work on modifying the Chapter 13 bankruptcy plan. Most bankruptcy trustees are very understanding and will usually give the debtor leeway, allowing them to lower their payments so they won't fail. The only other option an individual has, outside of trying to qualify for an early discharge due to a hardship, is to convert the Chapter 13 into a Chapter 7 bankruptcy. Hopefully, the debtor won't make too much money to qualify for Chapter 7 bankruptcy. If the debtor qualifies to file Chapter 7, the Chapter 13 can be converted and they will no longer be required to make the previous payments.
The main thing to learn here is to be proactive and contact your bankruptcy attorney if there is a problem with the ability to make the Chapter 13 bankruptcy payments. The outcome of not doing anything will only compound the debtor's problems. A dismissal could be financially devastating to an individual that is already strapped. There are things that can be done with the help of your bankruptcy attorney.
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